0000912057-14-000427.txt : 20150109 0000912057-14-000427.hdr.sgml : 20150109 20141106172710 ACCESSION NUMBER: 0000912057-14-000427 CONFORMED SUBMISSION TYPE: DRS PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20141106 20150109 DATE AS OF CHANGE: 20141204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Invitae Corp CENTRAL INDEX KEY: 0001501134 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 271701898 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DRS SEC ACT: 1933 Act SEC FILE NUMBER: 377-00834 FILM NUMBER: 141201894 BUSINESS ADDRESS: STREET 1: 458 BRANNAN STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94107 BUSINESS PHONE: (415) 992-8173 MAIL ADDRESS: STREET 1: 458 BRANNAN STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94107 FORMER COMPANY: FORMER CONFORMED NAME: InVitae Corp DATE OF NAME CHANGE: 20121105 FORMER COMPANY: FORMER CONFORMED NAME: Locus Development Inc DATE OF NAME CHANGE: 20100910 DRS 1 filename1.htm

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Invitae Corporation

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As submitted to the Securities and Exchange Commission confidentially on November 6, 2014. This draft registration statement has not been publicly filed with the Securities and Exchange Commission and all information herein remains strictly confidential.

Registration No. 333-               


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



INVITAE CORPORATION
(Exact name of registrant as specified in its charter)



Delaware   8071   27-1701898
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

458 Brannan Street
San Francisco, California 94107
(415) 374-7782
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Randal W. Scott, Ph.D.
Chief Executive Officer
Invitae Corporation
458 Brannan Street
San Francisco, California 94107
(415) 374-7782
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Mike Hird
Gabriella A. Lombardi
Patty M. DeGaetano
Pillsbury Winthrop Shaw Pittman LLP
2550 Hanover Street
Palo Alto, California 94304
  Lee Bendekgey
Chief Financial Officer and General Counsel
Invitae Corporation
458 Brannan Street
San Francisco, California 94107
  Charles S. Kim
David Peinsipp
Andrew S. Williamson
Cooley LLP
4401 Eastgate Mall
San Diego, California 92121



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a smaller
reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of each class of
securities to be registered

  Proposed maximum
aggregate
offering price(1)(2)

  Amount of
registration fee

 

Common Stock, $0.0001 par value per share

  $   $

 

(1)   Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)   Includes the aggregate offering price of shares that the underwriters have the option to purchase.



The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


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Subject to completion, dated                             , 2014

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where such offer or sale is not permitted.

Preliminary prospectus

                    shares

LOGO

Common stock

This is an initial public offering of shares of common stock by Invitae Corporation. We are offering                               shares of our common stock to be sold in the offering. The initial public offering price is expected to be between $              and $              per share.

Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock on the New York Stock Exchange under the symbol "NVTA."

We are an "emerging growth company" as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements.

   
 
  Per share
  Total
 
   

Initial public offering price

  $     $    

Underwriting discounts and commissions(1)

 
$
 
$
 

Proceeds to Invitae Corporation, before expenses

 
$
 
$
 
   

(1)    See "Underwriting" for a description of the compensation payable to the underwriters.

We have granted the underwriters an option for a period of 30 days to purchase up to                           additional shares of common stock.

Investing in our common stock involves a high degree of risk. See "Risk factors" beginning on page 13.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about                           , 2015.

J.P. Morgan

Cowen and Company   Leerink Partners

                           , 2015


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GRAPHIC



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Neither we nor the underwriters have authorized anyone to provide you with information different from or in addition to that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take any responsibility for, and can provide no assurances as to the reliability of, any information other than the information contained in the foregoing documents. We are offering to sell shares of our common stock and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and prospectus may have changed since that date.

Through and including                           , 2015 (the 25th day after the date of this prospectus) all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

This prospectus includes industry data and forecasts that we obtained from internal company surveys, publicly available information and industry publications and surveys. Our internal research and forecasts are based on management's understanding of industry conditions, and such information has not been verified by independent sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. These data and forecasts involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information.

In this prospectus, the "company," "Invitae," "we," "us" and "our" refer to Invitae Corporation and its subsidiaries on a consolidated basis. This prospectus also contains trademarks and trade names that are the property of their respective owners.

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Prospectus summary

The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. Because this is only a summary, you should read the rest of this prospectus carefully, including the sections entitled "Risk factors" and "Management's discussion and analysis of financial condition and results of operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

Overview

Invitae's mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Our goal is to aggregate most of the world's genetic tests into a single service with higher quality, faster turnaround time and lower price than many single gene tests today. We were founded on four core principles:

Patients should own and control their own genetic information;
Healthcare professionals are fundamental in ordering and interpreting genetic information;
Genetic information is more valuable when shared; and
Driving down the price of genetic information will increase its clinical and personal utility.

As the price of DNA sequencing has declined, the amount of genetic information that can be generated per dollar has increased exponentially, enabling the generation, analysis and storage of more comprehensive genetic information than ever before. According to Online Mendelian Inheritence in Man, a compendium of human genes maintained by Johns Hopkins University School of Medicine, or OMIM, there are more than 4,000 inherited genetic conditions for which the scientific and medical community has already identified specific genes and variants useful for diagnosis or treatment planning. By aggregating large numbers of currently available genetic tests into a single service, we can achieve great economies of scale that allow us to not only provide primary single gene or multi-gene tests but also to generate and store additional genetic information on behalf of the patient for future use. We refer to the service of managing genetic information over the course of disease or the lifetime of a patient as "genome management." In addition, as more individuals gain access to their genetic information, we believe that sharing genetic information will provide an economic opportunity for patients and us to participate in advancing the understanding and treatment of disease. We believe that our ongoing investment in building our infrastructure and attracting talent across a range of disciplines to generate, interpret and manage genetic information will position us to be a leader in the field of genetic testing and genome management.

We believe that genes are a fundamental particle of modern medicine and that genetic testing has the potential to affect billions of people. Virtually everyone is carrying loss of function mutations in their genome, recessive genetic conditions that may affect their extended family or genetic mutations that may affect their response to various drugs or therapies. Every individual has a unique genome, and we believe that comprehensive knowledge of this genetic makeup will be foundational to the future practice of medicine. We also believe that eventually many individuals in a modern healthcare system will have their genome sequenced at birth or during the course of their lives.

According to UnitedHealth Group Inc., the U.S. genetic testing and molecular diagnostics market in 2010 was estimated to be approximately $5 billion, of which approximately 60% was genetic testing. As of November 2014, genetests.org estimated that there were more than 39,000 different genetic tests available from over 650 laboratories. Based on UnitedHealth's estimates for the growth of the genetic testing and molecular diagnostics market and our assumption that genetic testing's share of this market

 

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will be held constant at approximately 60% between 2010 and 2021, we expect the U.S. genetic testing market to grow to at least $9 billion by 2021.

We are headquartered in San Francisco, California, where we have offices and a Clinical Laboratory Improvement Amendments, or CLIA, certified facility. We also have offices in Palo Alto, California as well as a second laboratory in Santiago, Chile. We have a multi-disciplinary team of 144 people as of October 31, 2014, including bioinformaticians, clinical and medical geneticists, commercial and managed care experts, genetic counselors, scientists, software engineers, web developers, graphic designers and lab automation specialists, as well as administrative and corporate personnel. We believe that creating a strong team is a competitive advantage, and we strive to foster a motivating and unique culture in which our people can thrive.

In the near term, we plan to focus on the immediate market for symptomatic disease with the goal to aggregate testing for large numbers of genetic diseases into a single low-cost service. As our market share grows we expect that our business will develop in three stages over the longer term:

Genetic testing:  making genetic testing more affordable and more accessible with faster turnaround time than ever before. We believe that there is a significant market opportunity for high volume, low cost genetic testing that can allow us to serve a large number of clients.

Genome management:  building a secure and trusted genome management infrastructure. By generating and storing large amounts of individualized genetic information for every patient sample, we believe we can create value over the course of disease or lifetime of a client.

Genome network:  sharing genetic information on a global scale to advance science and medicine. We plan to help patients share their genetic information in a way that benefits them and us by acting as a permission-based broker on their behalf.

Our solution for genetic testing

We are focused on making comprehensive genetic testing more affordable and more accessible than ever before, pursuing a large and rapidly growing market with a focus on price and quality. We aim to do so for the majority of genetic tests, consolidating most of them into a single offering at a price below the typical prices of many single gene or multi-gene panels.

We launched our first commercial offering in late November 2013, an assay of 216 genes comprising 85 different genetic disorders and 17 targeted panels, and began selling and marketing our multi-gene panels with a focused effort on hereditary cancers, including breast, colon and pancreatic cancer. We charge $1,500 per sample in most cases with the flexibility for our clients to order any subset of genes or multi-gene panels from our online ordering system for a given indication. We also currently offer a free re-requisition of additional data within the same indication when ordered within 90 days of the date of service. Importantly, we are providing turnaround time of less than three weeks for the substantial majority of our tests. Since our initial launch, we have marketed additional panels addressing other genetic conditions based on the same assay of 216 genes. We are growing our volume rapidly and, since our commercial launch, we have delivered more than 2,000 billable tests as of September 30, 2014. From inception through September 30, 2014, approximately 26% of billable tests have been paid.

 

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We have developed a value proposition called "the Invitae Advantage," which articulates part of our competitive advantage as follows:

More affordable than ever before.  One price. Any test.
Faster time to answers.  From sample to results in three weeks on average.
Flexible test options.  Design your own test or select a curated panel.
Deeper genetic insights.  Choose multi-gene panels or order a free re-requisition.
Confidence and quality.  Our team of genetic experts delivers high-quality test results.

Since our commercial launch, approximately 80% of our orders have been for indications associated with hereditary cancer. Our hereditary cancer panel options include BRCA1 and BRCA2, a high-risk hereditary breast cancer panel of seven genes, a hereditary colon cancer panel of 14 genes, a hereditary pancreatic cancer panel of 17 genes, or a more comprehensive hereditary cancer panel of 29 cancer genes. Each of the cancer genes or panels is typically available for $1,500 regardless of whether one or 29 genes are ordered. Sales of our tests have grown significantly in 2014 from over 200 tests in the first quarter of 2014 to over 1,000 tests in the third quarter of 2014, which we believe is evidence that our value proposition is attractive to our clients. We estimate that the U.S. market for hereditary cancer tests is greater than $650 million per year and thus represents a key growth opportunity for us. We believe that the market for hereditary breast and ovarian cancer could continue to expand as lower-cost testing becomes available, allowing healthcare systems to test larger populations more cost-effectively.

We plan to substantially increase our sales and marketing effort in oncology in 2014 and 2015 as well as expand our sales efforts beyond cancer. Since our initial commercialization, we have marketed additional panels involved in multiple different genetic disorders including cardiology, hematology, neurology and pediatric panels. For example in the field of neurology, we have recently started to market panels for Charcot-Marie Tooth, one of the most common inherited neurological genetic disorders in the United States, and Spastic Paraplegia. In cardiology we have recently begun to offer panels for hypertrophic cardiomyopathy, long QT syndrome, short QT syndrome and Brugada syndrome. We also offer panels for pediatric conditions such as Noonan spectrum disorders and ciliopathies.

Aggregating multiple genetic tests into one service provides economies of scale and greater laboratory efficiency. We are focused on delivering a wide variety of genetic content through our CLIA-certified laboratory, and plan to release an increasing menu of content over time. By providing large numbers of different but related tests, such as multiple genes associated with a broad genetic condition like hereditary cancer or cardiovascular disorders, we provide physicians with choice and flexibility in ordering tests for individual genes, panels of genes or custom sets of genes at the physician's discretion.

We expect to expand the amount of genetic information we provide over time to include all of the clinically-indicated genes currently known—more than 4,000 according to genetests.org—and eventually the whole genome. The long list of disorders for which clinicians currently order these tests highlights the opportunity at hand in aggregating the "long tail" of genetic tests.

We are developing an integrated portfolio of laboratory processes, software tools and informatics capabilities that allow us to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for physicians and their patients. In addition, we are optimizing web technologies for efficient and productive interactions with physicians and patients using our service. We are investing heavily in systems that we believe will allow us to deliver individual clinical reports for physicians and patients from an expanding menu of content at increasing speed while decreasing costs per gene over time.

 

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We have designed our service to be simple for our clients to use. Our clients send a sample to us and in turn receive a test report. Behind this streamlined user experience, however, is a sophisticated, highly automated infrastructure that we have developed in order to scale in a cost effective manner. Starting from the client requisition and patient sample, through the report delivery, we have invested heavily in tools and technologies at each step in the process.

One of our competitive advantages is the way in which we generate and deliver clinical reports to our clients. While our approach is enabled by recent advances in next generation sequencing technology, delivery of an individual, industry standard, clinical report that matches the clinical sensitivity and specificity of the various tests being ordered requires us to address a number of challenges. In order to do so, we have invested in solving four key areas of complexity:

Genetic complexity.  Multiple genes and pathways can be implicated in genetic disorders, This complexity has given rise to a rapidly evolving body of scientific and clinical research associating genes with clinically relevant outcomes. To address this complexity, we expect to continue to release new genetic content and provide healthcare professionals with the flexibility to customize their orders by genes, disorders or multi-gene panels.

Disparate, non-standardized clinical information.  The information used by many clinicians and researchers in the field of genetics is taken from multiple public databases in disparate repositories hosted around the world. However, many of these databases are subject to errors, inconsistencies and subjective outcome determinations. With the goal of addressing this challenge, we employ geneticists to evaluate available literature and correct errors before incorporating the information in our knowledge base, and we contribute to public understanding by publishing anonymized variant information.

Limitations of next generation sequencing to determine complex variants.  While current next generation sequencing technologies work well when the variant involves a single base change in the gene's structure, they are less effective when the variant involves a more complex variation, such as a large insertion, deletion or duplication. We have invested in integrated sample preparation and software analysis processes that allow us to identify certain complex variant types using our next generation sequencing platform without having to resort to alternative technologies.

Clinical interpretation at scale:  As sequencing costs decline and the amount of available raw DNA sequence data and genes analyzed per individual sample grows, we expect the cost to interpret the data to increase due to rising requirements for medical professionals' time to interpret the data. We have invested significantly in scientific curation, bioinformatics and software infrastructure and tools to build a knowledge base about genetic conditions, genes and variants. These investments have enabled us to significantly increase the reporting throughput while standardizing the variant identification and reporting process into a simple, easy to interpret, clinical report.

The evolution of our business

There is an opportunity for genetic tests and information to be aggregated and then ultimately captured in comprehensive genome management services. We believe this shift will enable the medical community to use genetic information on an ongoing basis, as part of mainstream medical practice, to improve patient care.

 

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Genome management

We are building a genome data management infrastructure to provide clients, including patients and healthcare professionals, with an ongoing resource for pertinent genetic information over the course of disease or life of a patient. In the future, we plan to work with healthcare providers to establish a system where this genetic information is linked at the point of care for appropriate use as needs arise.

The decreasing cost of DNA sequencing is allowing us to provide an increasing amount of genetic information for the same price and thus aggregate an expanding number of genes into a single service. As a result, our assay captures more genetic information than the physician may initially request. Only those genes that are requisitioned by the ordering physician are analyzed by our medical team and reported to the ordering physician and patient. The additional information is stored electronically on behalf of the patient should their physician request any of it in the future. Currently, we allow re-requisition of data for additional genes within the same indication at no additional charge within 90 days of the date of service.

As the amount of information available for each patient expands, we plan to initiate a genome management program to provide patients and their healthcare providers with access to that additional information to answer healthcare questions as they arise. We expect to make additional genetic content accessible to physicians and their patients along with educational materials on the conditions, genes and variants. Because the raw DNA sequence information has already been derived from our laboratory processes, the cost of delivering an additional clinical report will involve only information management and clinical interpretation, and as a consequence will be significantly lower than running a new test. Ultimately, we believe we can significantly improve patient care by offering comprehensive genetic testing, where reports for large numbers of genetic conditions can be available for additional charges over the lifetime of a patient.

The genome network

As our genetic testing and genome management offerings grow in scale, we intend to continue to invest in informatics solutions that enable sharing of genetic information to improve healthcare and clinical outcomes. Participants in our genome network may include patients, family members, healthcare professionals, payors, industry professionals, researchers and clinical trial sponsors.

The first application of our network strategy is our Invitae Family History Tool, which is available as a free web or iPad application. This application enables users to build, modify, share and save relevant family genetic and health history information. A second part of our network strategy is Clinvitae, a web property that allows physicians or patients to look up individual genes and variants in order to find out additional genetic information. In the future, we plan to add functionality to allow patients and physicians to share more information about their variants and connect with other patients or physicians who might be able to contribute additional information that could affect their health and wellness.

Our strategy

Our strategy for long-term growth is focused on five key drivers of our business, which we believe cumulate to create a flywheel effect:

Expand our genetic testing content.
Create a unique user experience.
Drive traffic.
Attract partners.
Lower the cost and price of genetic information.

 

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Risks relating to our business

Our business is subject to numerous risks that you should consider before investing in us. These risks are described more fully in the section entitled "Risk factors" immediately following this prospectus summary. We may be unable for many reasons, including some that are beyond our control, to implement our business strategy. In particular, risks associated with our business include the following:

We are an early-stage company with a history of losses, we expect to incur significant losses for the foreseeable future, and we may not be able to achieve or sustain profitability.

We will need to scale our infrastructure in advance of demand for our tests, and our failure to generate sufficient demand for our tests would have a negative impact on our business and our ability to attain profitability.

If we are not able to generate substantial demand for our tests, our commercial success will be negatively affected.

If third-party payors, including managed care organizations, private health insurers and government health plans, do not provide coverage and adequate reimbursement for our tests, our commercial success could be negatively affected.

Our success will depend on our ability to use rapidly changing genetic data to interpret test results accurately and consistently, and our failure to do so would have an adverse effect on our operating results and business and harm our reputation, and could result in substantial liabilities that exceed our resources.

We face intense competition, which is likely to intensify further as existing competitors devote additional resources to, and new participants enter, the market. If we cannot compete successfully, we may be unable to increase our revenue or achieve and sustain profitability.

We rely on a limited number of suppliers or, in some cases, sole suppliers, for some of our laboratory instruments and materials, and we may not be able to find replacements or immediately transition to alternative suppliers.

We are subject to numerous laws and regulations, including regulation by the Food and Drug Administration. If the FDA regulates our tests as medical devices, we could incur substantial costs and our business, financial condition and results of operations could be adversely affected.

If our laboratory in San Francisco becomes inoperable due to an earthquake or for any other reason, we will be unable to perform our tests and our business will be harmed.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

We have limited experience in marketing and selling our tests, and our success will depend in part on our ability to generate sales using a relatively small internal sales team and through alternative marketing strategies.

 

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Implications of being an emerging growth company

We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;

reduced disclosure about our executive compensation arrangements;

no non-binding advisory votes on executive compensation or golden parachute arrangements; and

exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (1) the last day of the fiscal year in which we have total annual gross revenue of $1 billion or more, (2) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering, (3) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years, or (4) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained in this prospectus may be different than the information you receive from other public companies in which you hold stock.

Corporate information

We were incorporated in the State of Delaware on January 13, 2010 under the name "Locus Development, Inc." and changed our name to Invitae Corporation in 2012. Our principal executive offices are located at 458 Brannan Street, San Francisco, California 94107, and our telephone number is (415) 374–7782. Our website address is www.invitae.com. We do not incorporate the information on, or accessible through, our website into this prospectus, and you should not consider any information on, or accessible through, our website as part of this prospectus.

 

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The offering

Common stock offered by us                     shares

Common stock to be outstanding immediately after this offering

 

                  shares

Option to purchase additional shares

 

The underwriters have a 30-day option to purchase up to an additional                  shares of common stock.

Use of proceeds

 

We estimate that the net proceeds to us from this offering will be approximately $          million, assuming an initial public offering price of $         per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us. We anticipate that we will use the net proceeds from this offering primarily for general corporate purposes, including working capital, research and development activities, selling and marketing activities, general and administrative matters and capital expenditures. See "Use of proceeds."

Risk factors

 

See "Risk factors" for a discussion of factors you should consider carefully before deciding to invest in our common stock.

Proposed NYSE symbol

 

"NVTA"

The number of shares of common stock that will be outstanding after this offering is based on 146,601,632 shares outstanding as of June 30, 2014, including 240,446 shares of common stock issued in connection with the early exercise of options which are subject to our right of repurchase and after giving effect to the automatic conversion immediately prior to the completion of this offering of all outstanding shares of our convertible preferred stock into an aggregate of 141,131,524 shares of common stock (which includes an aggregate of 60,000,000 shares of common stock issuable upon the conversion of Series F convertible preferred stock issued in August and October 2014), and excludes:

9,197,772 shares of common stock issuable upon the exercise of options outstanding as of June 30, 2014 under our 2010 Stock Incentive Plan, or the 2010 Stock Plan, at a weighted-average exercise price of $0.38 per share;

3,640,000 shares of common stock issuable upon the exercise of options granted after June 30, 2014 under our 2010 Stock Plan at an exercise price of $1.45 per share;

         shares of common stock, subject to increase on an annual basis, reserved for future issuance under our 2015 Stock Incentive Plan, or the 2015 Stock Plan, which will become effective in connection with this offering. On the date of this prospectus, any shares available for issuance under our 2010 Stock Plan will be added to the shares reserved under our 2015 Stock Plan, and we will cease granting awards under the 2010 Stock Plan; and

 

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         shares of common stock, subject to increase on an annual basis, reserved for future issuance under our Employee Stock Purchase Plan, or the ESPP, which will become effective in connection with this offering.

Unless otherwise indicated, all information in this prospectus assumes:

that our amended and restated certificate of incorporation, which we will file immediately prior to the completion of this offering, and our amended and restated bylaws, are each in effect;

the implementation of a 1-for-         reverse stock split to be effected prior to the completion of this offering; and

no exercise by the underwriters of their option to purchase up to an additional           shares of common stock.

 

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Summary consolidated financial and other data

The following summary financial data should be read together with our consolidated financial statements and related notes, "Selected consolidated financial and other data" and "Management's discussion and analysis of financial condition and results of operations" appearing elsewhere in this prospectus. The summary consolidated statements of operations data for the years ended December 31, 2012 and 2013 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary condensed consolidated statements of operations data for the six months ended June 30, 2013 and 2014, and the condensed consolidated balance sheet data as of June 30, 2014 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected in the future and results of interim periods are not necessarily indicative of the results for the entire year.

   
 
  Year ended December 31,   Six months ended June 30,  
(In thousands, except share, per share and other operating data)
 
  2012
  2013
  2013
  2014
 
   
 
   
   
  (Unaudited)
 

Consolidated Statements of Operations Data:

                         

Revenue

  $   $ 148   $ 6   $ 419  

Costs and operating expenses:

                         

Cost of revenue(1)

        667     252     1,574  

Research and development(1)

    5,557     16,039     6,165     10,043  

Selling and marketing(1)

        2,431     934     3,437  

General and administrative(1)

    3,004     5,764     2,290     4,900  
       

Total costs and operating expenses

    8,561     24,901     9,641     19,954  
       

Loss from operations

    (8,561 )   (24,753 )   (9,635 )   (19,535 )

Other income (expense), net

    2     (26 )   2     (3 )

Interest expense

    (43 )   (59 )   (30 )   (34 )
       

Net loss

  $ (8,602 ) $ (24,838 ) $ (9,663 ) $ (19,572 )
       

Net loss attributable to common stockholders(2)

  $ (9,014 ) $ (24,989 ) $ (9,814 ) $ (19,572 )
       

Net loss per share attributable to common stockholders, basic and diluted(2)

  $ (2.36 ) $ (6.02 ) $ (2.43 ) $ (4.15 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted(2)

    3,814,255     4,150,519     4,040,221     4,716,280  
       

Pro forma net loss per share attributable to common stockholders, basic and diluted(2)

        $ (0.41 )       $ (0.23 )
                       

Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted(2)

          60,977,738           85,847,804  
   

 

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  Year ended
December 31,
  Six months ended
June 30,
 
 
  2012
  2013
  2013
  2014
 
   

Other operating data:

                         

Billable tests

        229     73     702  
   

(1)    Includes stock-based compensation as follows:

 
  Year ended
December 31,
  Six months ended
June 30,
 
(In thousands)
  2012
  2013
  2013
  2014
 
   
 
   
   
  (Unaudited)
 

Cost of revenue

  $   $ 11   $ 4   $ 24  

Research and development

    46     165     53     148  

Selling and marketing

        42     13     55  

General and administrative

    19     42     13     97  
       

Total stock-based compensation

  $ 65   $ 260   $ 83   $ 324  
   

(2)    See Notes 2 and 10 to our audited consolidated financial statements and Note 6 of our unaudited condensed consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share attributable to common stockholders and basic and diluted pro forma net loss per share attributable to common stockholders.

   
 
  As of June 30, 2014  
(In thousands)
  Actual
  Pro forma
  Pro forma
as adjusted

 
   
 
  (Unaudited)
 

Consolidated balance sheet data:

                   

Cash and cash equivalents

  $ 22,039   $     $    

Working capital

    20,785              

Total assets

    34,148              

Capital lease obligation

    1,598              

Convertible preferred stock

    86,574              

Accumulated deficit

    (57,260 )            

Total stockholders' equity (deficit)

    (56,386 )            
   

The preceding table presents a summary of our unaudited consolidated balance sheet data as of June 30, 2014:

on an actual basis;

on a pro forma basis to give effect to the issuance of an aggregate of 60,000,000 shares of our Series F convertible preferred stock in August and October 2014 and the automatic conversion of all outstanding shares of our convertible preferred stock as of June 30, 2014 and the Series F convertible preferred stock into an aggregate of 141,131,524 shares of our common stock which will occur immediately prior to the completion of this offering; and

on a pro forma as adjusted basis to give further effect to the receipt of the estimated net proceeds from the sale of               shares of common stock in this offering at a price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of cash

 

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and cash equivalents, working capital, total assets and total stockholders' equity (deficit) by $               million, assuming that the number of shares offered as set forth on the cover page of this prospectus remains the same, and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders' equity (deficit) by approximately $               million, assuming a price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

 

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Risk factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing elsewhere in this prospectus, before making an investment decision. We cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and growth prospects. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks related to our business and strategy

We are an early-stage company with a history of losses, we expect to incur significant losses for the foreseeable future, and we may not be able to achieve or sustain profitability.

We have incurred substantial losses since our inception. For the year ended December 31, 2013 and for the six months ended June 30, 2014, we had a net loss of $24.8 million and $19.6 million, respectively. As of June 30, 2014, we had an accumulated deficit of $57.3 million. To date, we have generated limited revenue, and we may never achieve revenue sufficient to offset our expenses. In addition, we expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we focus on scaling our business and operations. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders' equity and working capital. Our failure to achieve and sustain profitability in the future would negatively affect our business, financial condition, results of operations and cash flows, and could cause the market price of our common stock to decline.

We began operations in January 2010, and we have only a limited operating history upon which you can evaluate our business and prospects. We commercially launched our assay of 216 genes in late November 2013. Our limited commercial history makes it difficult to evaluate our current business and makes predictions about our future results, prospects or viability subject to significant uncertainty. Our prospects must be considered in light of the risks and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets such as ours. These risks include an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, increase our customer base, implement and successfully execute our business and marketing strategy, continue to expand, automate and upgrade our laboratory, technology and data systems, obtain coverage and reimbursement by healthcare payors such as Medicare and private health insurers, provide rapid test turnaround times with accurate results at a low price, provide superior customer service, respond to competitive developments and attract, retain and motivate qualified personnel. We cannot assure you that we will be successful in addressing these risks, and the failure to do so could have a material adverse effect on our business, prospects, financial condition and results of operations.

We will need to scale our infrastructure in advance of demand for our tests, and our failure to generate sufficient demand for our tests would have a negative impact on our business and our ability to attain profitability.

Our success will depend in large part on our ability to extend our market position, to provide customers with high quality test reports quickly and at a lower price than our competitors, and to achieve sufficient test volume to realize economies of scale. In order to execute our business model, we intend to invest heavily in order to significantly scale our infrastructure, including our testing capacity and information systems, expand our customer service, billing and systems processes and enhance our internal quality

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assurance program. We will also need to hire and retain sufficient numbers of skilled personnel, including geneticists, biostatisticians, certified laboratory scientists and other scientific and technical personnel to process and interpret our genetic tests. We expect that much of this growth will be in advance of demand for our tests. Our current and future expense levels are to a large extent fixed and are largely based on our investment plans and our estimates of future revenue. Because the timing and amount of revenue from our tests is difficult to forecast, when revenue does not meet our expectations we may not be able to adjust our spending promptly or reduce our spending to levels commensurate with our revenue. Even if we are able to successfully scale our infrastructure and operations, we cannot assure you that demand for our tests will increase at levels consistent with the growth of our infrastructure. If we fail to generate demand commensurate with this growth or if we fail to scale our infrastructure sufficiently in advance of demand to successfully meet such demand, our business, prospects, financial condition and results of operations could be adversely affected.

If we are not able to generate substantial demand of our tests, our commercial success will be negatively affected.

Our business model assumes that we will be able to generate significant test volume, and we may not succeed in driving clinical adoption of our test to achieve sufficient volumes. Inasmuch as detailed genetic data from broad-based testing panels such as our tests have only recently become available at relatively affordable prices, the pace and degree of clinical acceptance of the utility of such testing is uncertain. Specifically, it is uncertain how much genetic data will be accepted as necessary or useful, as well as how detailed that data should be, particularly since medical practitioners may have become accustomed to genetic testing that is specific to one or a few genes. Given the substantial amount of additional information available from a broad-based testing panel such as ours, there may be distrust as to the reliability of such information when compared with more limited and focused genetic tests. To generate demand for our tests, we will need to continue to make physicians aware of the benefits of our tests, including the price, the breadth of our testing options, and the benefits of having additional genetic data available from which to make treatment decisions. In addition, physicians in other areas of medicine may not adopt genetic testing for hereditary disease as readily as it has been adopted in hereditary cancer and our efforts to sell our tests to physicians outside of oncology may not be successful. A lack of or delay in clinical acceptance of broad-based panels such as our tests would negatively impact sales and market acceptance of our tests and limit our revenue growth and potential profitability. Genetic testing is expensive and many potential customers may be sensitive to pricing. In addition, potential customers may not adopt our tests if adequate reimbursement is not available, or if we are not able to maintain low prices in the future relative to our competitors. If we are not able to generate demand for our tests at sufficient volume, or if it takes significantly more time to generate this demand than we anticipate, our business, prospects, financial condition and results of operations could be materially harmed.

If third-party payors, including managed care organizations, private health insurers and government health plans do not provide coverage and adequate reimbursement for our tests, our commercial success could be negatively affected.

Our ability to increase the number of billable tests and our revenue will depend on our success achieving broad reimbursement for our tests from third-party payors. Physicians may not order our tests unless third-party payors, such as managed care organizations, private health insurers and government healthcare programs, such as Medicare and Medicaid, cover and provide adequate reimbursement for a substantial portion of the price of our tests. Reimbursement by a payor may depend on a number of factors, including a payor's determination that a test is appropriate, medically necessary, and cost-effective.

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Since each payor makes its own decision as to whether to establish a policy or enter into a contract to cover our tests, as well as the amount it will reimburse for a test, seeking these approvals is a time-consuming and costly process. In addition, the determination by a payor to cover and the amount it will reimburse for our tests will likely be made on an indication by indication basis. To date, we have obtained policy-level reimbursement approval or contractual reimbursement for some indications for our test from a small number of commercial third-party payors, and have not obtained coverage from Medicare or any state Medicaid program. Further, we believe that establishing adequate reimbursement from Medicare is an important factor in gaining adoption from healthcare providers. Our claims for reimbursement from commercial payors may be denied upon submission, and we must appeal the claims. The appeals process is time consuming and expensive, and may not result in payment. In cases where there is not a contracted rate for reimbursement, there is typically a greater co-insurance or co-payment requirement from the patient which may result in further delay or decreased likelihood of collection.

We expect to continue to focus substantial resources on increasing adoption of, and coverage and reimbursement for, our current tests and any future tests we may develop. We believe it may take several years to achieve coverage and adequate contracted reimbursement with a majority of third-party payors. However, we cannot predict whether, under what circumstances, or at what payment levels payors will reimburse for our tests. If we fail to establish and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue could be harmed and our future prospects and our business could suffer.

Our success will depend on our ability to use rapidly changing genetic data to interpret test results accurately and consistently, and our failure to do so would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.

Our success depends on our ability to provide reliable, high-quality tests that incorporate rapidly evolving information about the role of genes and gene variants in disease and clinically relevant outcomes associated with those variants. Errors, including if our tests fail to detect genomic variants with high accuracy, or mistakes, including if we fail to or incompletely or incorrectly identify the significance of gene variants, could have a significant adverse impact on our business. Hundreds of genes can be implicated in some disorders, and overlapping networks of genes and symptoms can be implicated in multiple conditions. As a result, a substantial amount of judgment is required in order to interpret testing results for an individual patient and to develop an appropriate patient report. We classify variants in accordance with published guidelines as benign, likely benign, variants of uncertain significance, likely pathogenic or pathogenic, and these guidelines are subject to change. In addition, it is our practice to offer support to physicians and geneticists ordering our tests around which genes or panels to order as well as interpretation of genetic variants. We also rely on clinicians to interpret what we report and to incorporate specific information about an individual patient into the physician's treatment decision.

The marketing, sale and use of our genetic tests could subject us to liability for errors in, misunderstandings of, or inappropriate reliance on, information we provide to physicians or geneticists, and lead to claims against us if someone were to allege that our test failed to perform as it was designed, if we failed to correctly interpret the test results, or if the ordering physician were to misinterpret test results or improperly rely on them when making a clinical decision. A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend. Although we maintain liability insurance, including for errors and omissions, we cannot assure you that our insurance would fully protect us from the financial impact of defending against these types of claims or any judgments, fines or settlement costs arising out of any such claims. Any liability claim, including an

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errors and omissions liability claim, brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future. Additionally, any liability lawsuit could cause injury to our reputation or cause us to suspend sales of our tests. The occurrence of any of these events could have an adverse effect on our business, reputation and results of operations.

We face intense competition, which is likely to intensify further as existing competitors devote additional resources to, and new participants enter, the market. If we cannot compete successfully, we may be unable to increase our revenue or achieve and sustain profitability.

With the development of next generation sequencing, the clinical genetics market is becoming increasingly competitive, and we expect this competition to intensify in the future. We face competition from a variety of sources, including:

dozens of relatively specialized competitors focused on inherited clinical genetics and gene sequencing, such as Myriad Genetics, Inc., or Myriad, Ambry Genetics, Inc. and GeneDx, Inc., a subsidiary of Bio-Reference Laboratories, Inc.;

a few large, established general testing companies with large market share and significant channel power, such as Laboratory Corporation of America Holdings and Quest Diagnostics Incorporated;

a large number of clinical laboratories in an academic or healthcare provider setting that perform clinical genetic testing on behalf of their affiliated institutions and often sell and market more broadly; and

a large number of new entrants into the market for genetic information ranging from informatics and analysis pipeline developers to focused, integrated providers of genetic tools and services for health and wellness.

Hospitals, academic medical centers and eventually physician practice groups and individual physicians may also seek to perform at their own facilities the type of genetic testing we would otherwise perform for them. In this regard, continued development of equipment, reagents, and other materials as well as databases and interpretation services may enable broader direct participation in genetic testing and analysis.

Participants in closely related markets such as prenatal testing and clinical trial or companion diagnostic testing could converge on offerings that are competitive with the type of tests we perform. Instances where potential competitors are aligned with key suppliers or are themselves suppliers could provide such potential competitors with significant advantages.

In addition, the biotechnology and genetic testing fields are intensely competitive both in terms of service and price, and continue to undergo significant consolidation, permitting larger clinical laboratory service providers to increase cost efficiencies and service levels, resulting in more intense competition.

We believe the principal competitive factors in our market are:

price and quality of tests;
test turnaround time of testing results;
coverage and reimbursement arrangements with third-party payors;
breadth and depth of content;
convenience of testing;
brand recognition of test provider;
additional value-added services and informatics tools;
accessibility of results;

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client service;
quality of website content; and
reliability.

Many of our competitors and potential competitors have longer operating histories, larger customer bases, greater brand recognition and market penetration, higher margins on their tests, substantially greater financial, technological and research and development resources and selling and marketing capabilities, and more experience dealing with third-party payors. As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their tests than we do, or sell their tests at prices designed to win significant levels of market share. We may not be able to compete effectively against these organizations. Increased competition and cost-saving initiatives on the part of governmental entities and other third-party payors are likely to result in pricing pressures, which could harm our sales, profitability or ability to gain market share. In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies as use of next generation sequencing for clinical diagnosis and preventative care increases. Certain of our competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to website and systems development than we can. In addition, companies or governments that control access to genetic testing through umbrella contracts or regional preferences could promote our competitors or prevent us from performing certain services. If we are unable to compete successfully against current and future competitors, we may be unable to increase market acceptance and sales of our tests, which could prevent us from increasing our revenue or achieving profitability and could cause our stock price to decline.

Our industry is subject to rapidly changing technology and new and increasing amounts of scientific data related to genes and genetic variants and their role in disease. Our failure to develop tests to keep pace with these changes could make us obsolete.

In recent years, there have been numerous advances in methods used to analyze very large amounts of genomic information and the role of genetics and gene variants in disease and treatment therapies. Our industry has and will continue to be characterized by rapid technological change, increasingly larger amounts of data, frequent new testing service introductions and evolving industry standards, all of which could make our tests obsolete. Our future success will also depend on our ability to keep pace with the evolving needs of our customers on a timely and cost-effective basis and to pursue new market opportunities that develop as a result of technological and scientific advances. Our tests could become obsolete unless we continually update our offerings to reflect new scientific knowledge about genes and genetic variations and their role in diseases and treatment therapies.

We have limited experience in marketing and selling our tests, and our success will depend in part on our ability to generate sales using a relatively small internal sales team and through alternative marketing strategies.

We have limited experience marketing and selling our tests, which we began selling in late 2013. We may not be able to market or sell our current tests and any future tests we may develop effectively enough to drive demand sufficient to support our planned growth. We currently sell our tests in the United States through a relatively small internal sales force and outside the United States with the assistance of distributors. Historically, our sales efforts have been focused primarily on hereditary cancer and our efforts to sell our tests to physicians outside of oncology may not be successful, or may be difficult to do successfully without significant additional selling and marketing efforts and expense. As part of our strategy to reduce the cost of genetic testing, we will need to maintain our selling and marketing expenses

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at levels that are lower than many of our competitors through the use of focused sales efforts. Our future sales will depend in large part on our ability to develop and substantially expand awareness of our company and our tests through alternative strategies including through education of key opinion leaders, through social media-related and online outreach, education and marketing efforts, and through focused channel partner strategies designed to drive demand for our tests. We have limited experience implementing these types of alternative marketing efforts. We may not be able to drive sufficient levels of revenue using these sales and marketing methods and strategies necessary to support our planned growth, and our failure to do so could limit our revenue and potential profitability.

Outside the United States we use and intend to continue to use distributors to assist with sales, logistics, education, and customer support. Identifying, qualifying, and engaging distributors with local industry experience and knowledge will be necessary to effectively market and sell our tests outside the United States. We may not be successful in finding, attracting and retaining additional distributors, or we may not be able to enter into additional distribution arrangements on favorable terms. Sales practices utilized by our distributors that are locally acceptable may not comply with sales practices standards required under U.S. laws that apply to us, which could create additional compliance risk. If our sales and marketing efforts are not successful outside the United States, we may not achieve significant market acceptance for our tests outside the United States, which could materially and adversely impact our business operations.

We rely on a limited number of suppliers or, in some cases, sole suppliers, for some of our laboratory instruments and materials, and we may not be able to find replacements or immediately transition to alternative suppliers.

We rely on a limited number of suppliers, or, in some cases, sole suppliers, including Agilent Technologies, Inc., Illumina, Inc., Integrated DNA Technologies Incorporated, Qiagen N.V., and Roche Holdings Ltd. for certain laboratory substances used in the chemical reactions incorporated into our processes, which we refer to as reagents, as well as sequencers and other equipment and materials which we use in our laboratory operations. We do not have any short- or long-term agreements with our suppliers, and our suppliers could cease supplying these materials and equipment at any time, or fail to provide us with sufficient quantities of materials or materials that meet our specifications. Our laboratory operations could be interrupted if we encounter delays or difficulties in securing these reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute. Any such interruption could significantly affect our business, financial condition, results of operations and reputation. We rely on Illumina as the sole supplier of next generation sequencers and associated reagents and as the sole provider of maintenance and repair services for these sequencers. Any disruption in Illumina's operations could impact our supply chain and laboratory operations as well as our ability to conduct our tests, and it could take a substantial amount of time to integrate replacement equipment into our laboratory operations.

We believe that there are only a few other manufacturers that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents. The use of equipment or materials provided by these replacement suppliers would require us to alter our laboratory operations. Transitioning to a new supplier would be time consuming and expensive, may result in interruptions in our laboratory operations, could affect the performance specifications of our laboratory operations or could require that we revalidate our tests. We cannot assure you that we will be able to secure alternative equipment, reagents and other materials, and bring such equipment, reagents and materials on line and revalidate them without experiencing interruptions in our workflow. In the case of an alternative supplier for Illumina, we cannot assure you that replacement sequencers and associated reagents will be available or will meet our quality control and performance

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requirements for our laboratory operations. If we encounter delays or difficulties in securing, reconfiguring or revalidating the equipment and reagents we require for our tests, our business, financial condition, results of operations and reputation could be adversely affected.

If our laboratory in San Francisco becomes inoperable due to an earthquake or for any other reason, we will be unable to perform our tests and our business will be harmed.

We perform all of our tests at our laboratory in San Francisco, California. Our laboratory and the equipment we use to perform our tests would be costly to replace and could require substantial lead time to replace and qualify for use. Our laboratory may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, which may render it difficult or impossible for us to perform our tests for some period of time. The inability to perform our tests or the backlog that could develop if our laboratory is inoperable for even a short period of time may result in the loss of customers or harm our reputation. Although we maintain insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.

We currently have a second laboratory established in Santiago, Chile, however this laboratory has not yet been used for the performance of our tests in significant volume. The use of such laboratory as a back-up facility for our laboratory operations in San Francisco would require substantial lead time, including to obtain CLIA certification, as well as to secure the necessary equipment, labor and other resources. In addition, a number of third-party payors, including Medicare, do not reimburse for tests performed outside of the United States.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we and our third-party billing and collections provider collect and store sensitive data, including legally protected health information, personally identifiable information, intellectual property and proprietary business information owned or controlled by ourselves or our customers, payors, and other parties. We manage and maintain our applications and data utilizing a combination of on-site systems, managed data center systems, and cloud-based data center systems. We also communicate sensitive patient data through our Invitae Family History Tool. These applications and data encompass a wide variety of business-critical information including research and development information, commercial information, and business and financial information. We face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate disclosure, inappropriate modification, and the risk of our being unable to adequately monitor and modify our controls over our critical information.

The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure, and that of our third-party billing and collections provider, may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance, or other disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost, or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under federal or state laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1996, or HIPAA, the Health Information Technology for Economic and Clinical Heath

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Act, or HITECH, and regulatory penalties. Although we have implemented security measures and a formal, dedicated enterprise security program to prevent unauthorized access to patient data, our Invitae Family History Tool is currently accessible through our online portal and through our mobile applications, and there is no guarantee we can protect our online portal or our mobile applications from breach. Unauthorized access, loss or dissemination could also disrupt our operations (including our ability to conduct our analyses, provide test results, bill payors or patients, process claims and appeals, provide customer assistance, conduct research and development activities, collect, process, and prepare company financial information, provide information about our tests and other patient and physician education and outreach efforts through our website, and manage the administrative aspects of our business) and damage our reputation, any of which could adversely affect our business.

Penalties for failure to comply with a requirement of HIPAA and HITECH vary significantly, and include civil monetary penalties of up to $1.5 million per calendar year. A person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and up to one-year imprisonment. The criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer, or use identifiable health information for commercial advantage, personal gain, or malicious harm.

In addition, the interpretation and application of consumer, health-related, and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory, and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition, these privacy regulations may differ from country to country, and may vary based on whether testing is performed in the United States or in the local country. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.

We may not be able to manage our future growth effectively, which could make it difficult to execute our business strategy.

Our expected future growth could create a strain on our organizational, administrative and operational infrastructure, including laboratory operations, quality control, customer service, marketing and sales, and management. We may not be able to maintain the quality of or expected turnaround times for our tests, or satisfy customer demand as it grows. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. We plan to implement new enterprise software systems in a number of areas affecting a broad range of business processes and functional areas. The time and resources required to implement these new systems is uncertain, and failure to complete these activities in a timely and efficient manner could adversely affect our operations. In addition, following the closing of this offering, we plan to hire a chief medical officer, as well as add additional geneticists, biostatisticians, certified laboratory scientists and other scientific and technical personnel. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our business could be harmed. Future growth in our business could also make it difficult for us to maintain our corporate culture.

The loss of any member of our senior management team could adversely affect our business.

Our success depends in large part upon the skills, experience and performance of members of our executive management team and others in key leadership positions. The efforts of these persons will be critical to us as we continue to develop our technologies and test processes and focus on scaling our business. If we were to lose one or more key executives, we may experience difficulties in competing

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effectively, developing our technologies and implementing our business strategy. All of our executives and employees are at-will, which means that either we or the executive or employee may terminate their employment at any time. We do not carry key man insurance for any of our executives or employees. In addition, we do not have a long-term retention agreement or long-term equity incentives in place with our chief executive officer.

We rely on highly skilled personnel in a broad array of disciplines and, if we are unable to hire, retain or motivate these individuals, or maintain our corporate culture, we may not be able to maintain the quality of our services or grow effectively.

Our performance, including our research and development programs and laboratory operations, largely depend on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization, including scientists, biostatisticians and technicians. Competition in our industry for qualified employees is intense, and we may not be able to attract or retain qualified personnel in the future, including scientists, biostatisticians and technicians, due to the competition for qualified personnel among life science businesses as well as universities and public and private research institutions, particularly in the San Francisco Bay Area. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that could adversely affect our ability to scale our business, support our research and development efforts and our clinical laboratory. We believe that our corporate culture fosters innovation, creativity and teamwork. However, as our organization grows, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. This could negatively impact our ability to retain and attract employees and our future success.

Development of new tests is a complex process, and we may be unable to commercialize new tests on a timely basis, or at all.

We cannot assure you that we will be able to develop and commercialize new tests on a timely basis. Before we can commercialize any new tests, we will need to expend significant funds in order to:

conduct research and development;
further develop and scale our laboratory processes; and
further develop and scale our infrastructure to be able to analyze increasingly larger and more diverse amounts of data.

Our testing service development process involves risk, and development efforts may fail for many reasons, including:

failure of any test to perform as expected;
lack of validation or reference data; or
failure to demonstrate utility of a test.

As we develop tests, we will have to make significant investments in development, marketing and selling resources. In addition, competitors may develop and commercialize competing tests faster than we are able to do so.

International expansion of our business exposes us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.

We currently have a laboratory in Chile and distribution arrangements in several countries, and our business strategy contemplates significant international expansion. We plan to enter into additional

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distribution relationships to conduct physician outreach activities and to develop and expand payor relationships outside of the United States. Doing business internationally involves a number of risks, including:

multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements, and other governmental approvals, permits and licenses;

failure by us or our distributors to obtain regulatory approvals for the use of our tests in various countries;

complexities and difficulties in obtaining protection and enforcing our intellectual property;

difficulties in staffing and managing foreign operations;

complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems;

logistics and regulations associated with shipping blood samples, including infrastructure conditions and transportation delays;

limits on our ability to penetrate international markets if we do not to conduct our tests locally;

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial conditions on demand and payment for our tests, and exposure to foreign currency exchange rate fluctuations;

natural disasters, political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and

regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, or FCPA, its books and records provisions, or its anti-bribery provisions.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of operations.

In addition, applicable export or import laws and regulations such as prohibitions on the export of blood imposed by countries outside of the United States, or international privacy or data restrictions that are different or more stringent than those of the United States, may require that we build additional laboratories or engage in joint ventures or other business partnerships in order to offer our tests internationally in the future. Any such restrictions would impair our ability to offer our tests in such countries and could have an adverse effect on our business, financial condition and results of operations.

Our inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize new tests and expand our operations.

We expect capital expenditures and operating expenses to increase over the next several years as we expand our infrastructure, commercial operations and research and development activities. The proceeds from this offering will not be sufficient to fully fund our business and growth strategy. We may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements. Additional funding may not be available to us on acceptable terms, or at all. If we raise funds by issuing equity securities, dilution to our stockholders would result. Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. The terms of debt securities issued or borrowings, if available, could impose significant restrictions on our operations. The

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incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline. In the event that we enter into collaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms. These agreements may require that we relinquish or license to a third party on unfavorable terms our rights to tests we otherwise would seek to develop or commercialize ourselves, or reserve certain opportunities for future potential arrangements when we might be able to achieve more favorable terms. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives. In addition, we may have to work with a partner on one or more aspects of our tests or market development programs, which could lower the economic value of those tests or programs to our company.

We may acquire businesses or assets, form joint ventures or make investments in other companies or technologies that could harm our operating results, dilute our stockholders' ownership, or cause us to incur debt or significant expense.

As part of our business strategy, we may pursue acquisitions of complementary businesses or assets, as well as technology licensing arrangements. We also may pursue strategic alliances that leverage our core technology and industry experience to expand our offerings or distribution, or make investments in other companies. As an organization, we have limited experience with respect to acquisitions as well as the formation of strategic alliances and joint ventures. If we make any acquisitions in the future, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions by us also could result in significant write-offs or the incurrence of debt and contingent liabilities, any of which could harm our operating results. Integration of an acquired company or business also may require management resources that otherwise would be available for ongoing development of our existing business. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, technology license, strategic alliance, joint venture or investment.

To finance any acquisitions or investments, we may choose to raise additional funds. If we raise funds by issuing equity securities, dilution to our stockholders could result. Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock. The terms of debt securities issued or borrowings could impose significant restrictions on our operations. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or products, or grant licenses on terms that are not favorable to us. Once we become a public company, if the price of our common stock is low or volatile, we may not be able to acquire other companies for stock. Alternatively, it may be necessary for us to raise additional funds for these activities through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.

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We depend on our information technology systems, and any failure of these systems could harm our business.

We depend on information technology and telecommunications systems for significant elements of our operations, including our laboratory information management system, our bioinformatics analytical software systems, our database of information relating to genetic variations and their role in disease process and drug metabolism, our clinical report optimization systems, our customer-facing web-based software, our customer reporting, and our family history and risk assessment tools. We have installed, and expect to expand, a number of enterprise software systems that affect a broad range of business processes and functional areas, including for example, systems handling human resources, financial controls and reporting, customer relationship management, regulatory compliance, and other infrastructure operations. In addition, we intend to extend the capabilities of both our preventative and detective security controls by augmenting the monitoring and alerting functions, the network design, and the automatic countermeasure operations of our technical systems. These information technology and telecommunications systems support a variety of functions, including laboratory operations, test validation, sample tracking, quality control, customer service support, billing and reimbursement, research and development activities, scientific and medical curation, and general administrative activities. In addition, our third-party billing and collections provider depends upon technology and telecommunications systems provided by outside vendors.

Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses, and similar disruptive problems. Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our information technology and telecommunications systems, failures or significant downtime of our information technology or telecommunications systems or those used by our third-party service providers could prevent us from conducting tests, preparing and providing reports to physicians, billing payors, processing reimbursement appeals, handling physician or patient inquiries, conducting research and development activities, and managing the administrative aspects of our business. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business.

Ethical, legal and social concerns related to the use of genetic information could reduce demand for our tests.

Genetic testing has raised ethical, legal, and social issues regarding privacy and the appropriate uses of the resulting information. Governmental authorities could, for social or other purposes, limit or regulate the use of genetic information or genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Similarly, these concerns may lead patients to refuse to use, or clinicians to be reluctant to order, genomic tests even if permissible. These and other ethical, legal and social concerns may limit market acceptance of our tests or reduce the potential markets for our tests, either of which could have an adverse effect on our business, financial condition, or results of operations.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

We are exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with government regulations or similar regulations of comparable foreign regulatory authorities, to provide

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accurate information to the FDA or comparable foreign regulatory authorities, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, and to report financial information or data accurately or disclose unauthorized activities to us. We have a code of conduct and ethics for our directors, officers and employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

Risks related to government regulation

If the FDA regulates our tests as medical devices, we could incur substantial costs and our business, financial condition, and results of operations could be adversely affected.

We provide our tests as laboratory-developed tests, or LDTs. The Centers for Medicare and Medicaid Services, or CMS, and certain state agencies regulate the performance of LDTs (as authorized by the Clinical Laboratory Improvement Amendments of 1988, or CLIA, and state law, respectively).

Historically, the U.S. Food and Drug Administration, or FDA, has exercised enforcement discretion with respect to most LDTs and has not required laboratories that furnish LDTs to comply with the agency's requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls). In recent years, however, the FDA has stated it intends to end its policy of general enforcement discretion and regulate certain LDTs as medical devices. To this end, on October 3, 2014, the FDA issued two draft guidance documents, entitled "Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs)" and "FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs)", respectively, that set forth a proposed risk-based regulatory framework that would apply varying levels of FDA oversight to LDTs. The FDA has indicated that it does not intend to modify its policy of enforcement discretion until the draft guidance documents are finalized. It is unclear at this time when, or if, the draft guidance documents will be finalized, and even then, the new regulatory requirements are proposed to be phased-in consistent with the schedule set forth in the guidance (in as little as 12 months after the draft guidance is finalized for certain high-priority LDTs). Nevertheless, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time.

Legislative proposals addressing the FDA's oversight of LDTs have been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time-to-time. The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA's plans to regulate certain LDTs as medical devices is difficult to predict at this time.

If the FDA ultimately regulates certain LDTs as medical devices, whether via final guidance, final regulation, or as instructed by Congress, our tests may be subject to certain additional regulatory requirements. Complying with the FDA's requirements for medical devices can be expensive, time-consuming, and subject us to significant or unanticipated delays. Insofar as we may be required to obtain premarket clearance or approval to perform or continue performing an LDT, we cannot assure you that we will be able to obtain such authorization. Even if we obtain regulatory clearance or approval where required, such authorization may not be for the intended uses that we believe are commercially attractive or are critical to the

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commercial success of our tests. As a result, the application of the FDA's medical device requirements to our tests could materially and adversely affect our business, financial condition, and results of operations.

Failure to comply with applicable FDA regulatory requirements may trigger a range of enforcement actions by the FDA including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations, and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.

In addition, in November 2013, the FDA issued final guidance regarding the distribution of products labeled for research use only. Certain of the reagents and other products we use in our tests are labeled as research use only products. Certain of our suppliers may cease selling research use only products to us and any failure to obtain an acceptable substitute could significantly and adversely affect our business, financial condition and results of operations.

If we fail to comply with federal, state and foreign laboratory licensing requirements, we could lose the ability to perform our tests or experience disruptions to our business.

We are subject to CLIA, a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention, or treatment of disease. CLIA regulations establish specific standards with respect to personnel qualifications, facility administration, proficiency testing, quality control, quality assurance, and inspections. CLIA certification is also required in order for us to be eligible to bill state and federal healthcare programs, as well as many private third-party payors, for our tests. We have a current CLIA certificate to conduct our tests at our laboratory in San Francisco. To renew this certificate, we are subject to survey and inspection every two years. Moreover, CLIA inspectors may make random inspections of our clinical reference laboratory.

We are also required to maintain a license to conduct testing in California. California laws establish standards for day-to-day operation of our clinical reference laboratory in San Francisco, including the training and skills required of personnel and quality control. We also maintain licenses to conduct testing in Florida, Maryland, Pennsylvania and Rhode Island. Our clinical reference laboratories are required to be licensed on a test-specific basis by New York State as an out of state laboratory and our products, as LDTs, must be approved by the New York State Department of Health, or NYDOH, before they are performed on specimens from New York. Once approved, we would also be subject to periodic inspection by the NYDOH and required to demonstrate ongoing compliance with NYDOH regulations and standards. Because our laboratories are not licensed by New York, we are currently prohibited from testing samples from patients located in New York. Other states may adopt similar licensure requirements in the future, which may require us to modify, delay or stop our operations in such jurisdictions. We may also be subject to regulation in foreign jurisdictions as we seek to expand international utilization of our tests or such jurisdictions adopt new licensure requirements, which may require review of our tests in order to offer them or may have other limitations such as restrictions on the transport of human blood necessary for us to perform our tests that may limit our ability to make our tests available outside of the United States. Complying with licensure requirements in new jurisdictions may be expensive, time-consuming, and subject us to significant and unanticipated delays.

Failure to comply with applicable clinical laboratory licensure requirements may result in a range of enforcement actions, including license suspension, limitation, or revocation, directed plan of action, onsite monitoring, civil monetary penalties, criminal sanctions, and cancellation of the laboratory's approval to receive Medicare and Medicaid payment for its services, as well as significant adverse publicity. Any sanction imposed under CLIA, its implementing regulations, or state or foreign laws or regulations governing clinical laboratory licensure, or our failure to renew our CLIA certificate, a state or foreign

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license, or accreditation, could have a material adverse effect on our business, financial condition and results of operations. Even if we were able to bring our laboratory back into compliance, we could incur significant expenses and potentially lose revenue in doing so.

The College of American Pathologists, or CAP, maintains a clinical laboratory accreditation program. Designed to go well beyond regulatory compliance, CAP asserts that the program helps laboratories achieve the highest standards of excellence to positively impact patient care. While not required to operate a CLIA-certified laboratory, many private insurers require CAP accreditation as a condition to contracting with clinical laboratories to cover their tests. In addition, some countries outside the United States require CAP accreditation as a condition to permitting clinical laboratories to test samples taken from their citizens. We have applied for CAP accreditation but have not yet received it. Failure to obtain CAP accreditation could have a material adverse effect on the sales of our tests and the results of our operations.

Complying with numerous statutes and regulations pertaining to our business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.

Our operations are subject to other extensive federal, state, local and foreign laws and regulations, all of which are subject to change. These laws and regulations currently include, among others:

HIPAA, which established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions;

amendments to HIPAA under HITECH, which strengthen and expand HIPAA privacy and security compliance requirements, increase penalties for violators, extend enforcement authority to state attorneys general, and impose requirements for breach notification;

the federal Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for or to induce such person to refer an individual, or to purchase, lease, order, arrange for, or recommend purchasing, leasing or ordering, any good, facility, item or service that is reimbursable, in whole or in part, under a federal healthcare program;

the federal Stark physician self-referral law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare programs, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services, and prohibits that entity from billing or presenting a claim for the designated health services furnished pursuant to the prohibited referral, unless an exception applies;

the federal false claims laws, which impose liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government;

the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;

the HIPAA fraud and abuse provisions, which created new federal criminal statutes that prohibit, among other things, defrauding healthcare programs, willfully obstructing a criminal investigation of a

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    healthcare offense and falsifying or concealing a material fact or making any materially false statements in connection with the payment for healthcare benefits, items or services;

other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payor, including private insurers;

the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party;

state laws that prohibit other specified practices, such as billing physicians for testing that they order; waiving coinsurance, copayments, deductibles, and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; and

similar foreign laws and regulations that apply to us in the countries in which we operate or may operate in the future.

We have adopted policies and procedures designed to comply with these laws and regulations. In the ordinary course of our business, we conduct internal reviews of our compliance with these laws. Our compliance is also subject to governmental review. The growth of our business and our expansion outside of the United States may increase the potential of violating these laws or our internal policies and procedures. The risk of our being found in violation of these or other laws and regulations is further increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought against us for violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. If our operations are found to be in violation of any of these laws and regulations, we may be subject to any applicable penalty associated with the violation, including administrative, civil and criminal penalties, damages, fines, individual imprisonment, exclusion from participation in Federal healthcare programs, refunding of payments received by us, and curtailment or cessation of our operations. Any of the foregoing consequences could seriously harm our business and our financial results.

We could be adversely affected by violations of the FCPA and other worldwide anti-bribery laws.

We are also subject to the FCPA, which prohibits companies and their intermediaries from making payments in violation of law to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage. Our reliance on independent distributors to sell our tests internationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents, and we could be held responsible for their actions. Other U.S. companies in the medical device and pharmaceutical fields have faced criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with these individuals. We are also subject to similar anti-bribery laws in the jurisdictions in which we operate, including the United Kingdom's Bribery Act of 2010, which also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery. These laws are complex and far-reaching in nature, and, as a result, we cannot assure you that we would not be required in the future to alter one or more of our practices to be in compliance with these laws or any changes in these laws or the interpretation thereof. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, prospects, financial condition, or

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results of operations. We could also incur severe penalties, including criminal and civil penalties, disgorgement, and other remedial measures.

Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, may have a material adverse effect on our financial condition, results of operations and cash flows.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively referred to as the Affordable Care Act, was enacted in the United States, which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers. Among other things, the Affordable Care Act:

requires each medical device manufacturer to pay a sales tax equal to 2.3% of the price for which such manufacturer sells its medical devices, and began to apply to sales of taxable medical devices after December 31, 2012. It is unclear at this time when, or if, the provision of our LDTs will trigger the medical device tax if the FDA ends its policy of general enforcement discretion and regulates certain LDTs as medical devices. It is possible, however, that this tax will apply to some or all of our tests or tests which are in development.

mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee Schedule of 1.75% for the years 2011 through 2015. In addition, a multi-factor productivity adjustment is made to the fee schedule payment amount.

establishes an Independent Payment Advisory Board to reduce the per capita rate of growth in Medicare spending. The Independent Payment Advisory Board has broad discretion to propose policies, which may have a negative impact on payment rates for our tests beginning in 2016.

The Medicare Physician Fee Schedule rates for diagnostic tests are updated annually under the current statutory formula. For the past several years, the application of the statutory formula would have resulted in substantial payment reductions to all items and services reimbursed under the Physician Fee Schedule if Congress had failed to intervene. In the past, Congress has passed interim legislation to prevent the decreases, with the most current legislation postponing the payment reductions through March 31, 2015. If Congress fails to pass legislation to prevent application of the sustainable growth rate payment reductions beginning April 1, 2015, or for any future deadline, the resulting decrease in payment could materially adversely impact our revenue for services reimbursed under the Medicare Physician Fee Schedule, e.g., physician interpretation of molecular testing.

Many of the Current Procedure Terminology, or CPT, procedure codes that we use to bill our tests were revised by the American Medical Association, effective January 1, 2013. Moreover, the AMA recently released new codes to report genomic sequencing procedures, and in early October 2014, CMS published a preliminary determination that proposes to set the price for these codes for purposes of calendar year 2015 via the gap-filling methodology, where Medicare contractors establish jurisdiction-specific payment amounts for these tests, from which national limits may be set under Medicare for 2016. We do not yet know how our tests may fit under these new codes, but if we are required to report our tests under these codes, we cannot assure you that Medicare or its contractors will set adequate reimbursement rates for these new codes.

In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, or PAMA, which included substantial changes to the way in which clinical laboratory services will be paid under Medicare. Under PAMA, clinical laboratories must report to Medicare private payor rates beginning in 2016 and every three years thereafter for clinical diagnostic laboratory tests that are not advanced diagnostic laboratory tests and every year for advanced diagnostic laboratory tests. An advanced diagnostic laboratory test is a

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clinical diagnostic laboratory test covered under Medicare that is offered and furnished only by a single laboratory and not sold for use by a laboratory other than the original developing laboratory (or a successor owner) and meets one of the following criteria: (1) the test is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result; (2) the test is cleared or approved by the FDA; or (3) the test meets other similar criteria established by the Secretary of Health and Human Services (no criteria have been established by the Secretary as of October 2014).

We do not believe that our tests meet the current definition of advanced diagnostic laboratory tests, but in the event that our tests are determined by CMS to meet these criteria or new criteria developed by CMS, we would be required to report private payor data for those tests annually. Otherwise, we will be required to report private payor rates for our tests on an every three years basis. Laboratories that fail to report the required payment information may be subject to substantial civil money penalties.

For tests furnished on or after January 1, 2017, Medicare payments for clinical diagnostic laboratory tests will be paid based upon these reported private payor rates. For clinical diagnostic laboratory tests that are assigned a new or substantially revised code, initial payment rates for clinical diagnostic laboratory tests that are not advanced diagnostic laboratory tests will be assigned by the cross-walk or gap-fill methodology, as under prior law. Initial payment rates for new advanced diagnostic laboratory tests will be based on the actual list charge for the laboratory test. The impact of the new payment system on rates for our tests, including any current or future clinical diagnostic laboratory tests or advanced diagnostic laboratory tests we develop, is not clear at this time.

We cannot predict whether future healthcare initiatives will be implemented at the federal or state level, or how any future legislation or regulation may affect us. For instance, the payment reductions imposed by the Affordable Care Act and the expansion of the federal and state governments' role in the U.S. healthcare industry as well as changes to the reimbursement amounts paid by payors for our tests and future tests or our medical procedure volumes may reduce our profits and have a materially adverse effect on our business, financial condition, results of operations, and cash flows. Moreover, Congress has proposed on several occasions to impose a 20% coinsurance on patients for clinical laboratory tests reimbursed under the clinical laboratory fee schedule, which would increase our billing and collecting costs and decrease our revenue.

If we use hazardous materials in a manner that causes injury, we could be liable for resulting damages.

Our activities currently require the use of hazardous chemicals and biological material. We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling, or disposal of these materials. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have. Additionally, we are subject on an ongoing basis to federal, state, and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with these laws and regulations may become significant, and our failure to comply may result in substantial fines or other consequences, and either could negatively affect our operating results.

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Risks related to our intellectual property

Litigation or other proceedings or third-party claims of intellectual property infringement or misappropriation have and may continue to require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price.

Our commercial success will depend in part on our avoiding infringement of patents and proprietary rights of third parties, including for example the intellectual property rights of competitors. Our activities may be subject to claims that we infringe or otherwise violate patents owned or controlled by third parties. Numerous U.S. and foreign patents and pending patent applications exist in the genetic testing market and are owned by third parties. We cannot assure you that our operations do not, or will not in the future, infringe existing or future patents. We may be unaware of patents that a third party, including for example a competitor in the genetic testing market, might assert are infringed by our business. There may also be patent applications that, if issued as patents, could be asserted against us. Third parties making claims against us for infringement or misappropriation of their intellectual property rights may seek and obtain injunctive or other equitable relief, which could effectively block our ability to perform our tests. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay our development or sales of any tests or other activities that are the subject of such suit. Defense of these claims, regardless of merit, could cause us to incur substantial expenses and be a substantial diversion of our employee resources. In the event of a successful claim of infringement against us by a third party, we may have to (1) pay substantial damages, including treble damages and attorneys' fees if we are found to have willfully infringed patents; (2) obtain one or more licenses, which may not be available on commercially reasonable terms (if at all); (3) pay royalties; and (4) redesign any infringing tests or other activities, which may be impossible or require substantial time and monetary expenditure.

On November 26, 2013, in response to infringement allegations by Myriad we sued Myriad in the Northern District of California for declaratory judgment that certain of its U.S. patents are invalid and not infringed by our tests. This case has since been consolidated for pre-trial proceedings with actions for infringement by Myriad together with certain of its licensors, the Myriad Plaintiffs, against six other companies. See "Business—Legal proceedings." The Myriad Plaintiffs counterclaimed against us, alleging that our tests infringe those patents and alleging that we are willfully infringing those patents. As we continue to commercialize our tests in their current or an updated form, launch different and expanded tests, and enter new markets, we expect the Myriad Plaintiffs will continue to claim, and other competitors might claim, that our tests infringe or misappropriate their intellectual property rights as part of business strategies designed to impede our successful commercialization and entry into new markets.

Although we believe that we are not infringing any valid and enforceable patent rights of the Myriad Plaintiffs, we cannot assure you that the court will rule in our favor or, if such a ruling is made, that it can be sustained upon any appeal. We have incurred significant costs and a diversion of the attention of our management and technical personnel in defending ourselves against these claims, and we may in the future incur substantial costs and further diversion of the attention of our management and technical personnel in defending ourselves against such claims. Any adverse ruling or perception of an adverse ruling in defending ourselves could have a material adverse impact on our cash position and stock price. Furthermore, parties making claims against us, such as the Myriad Plaintiffs, may seek and thereby potentially obtain injunctive or other relief, which could block our ability to commercialize our tests, and could result in the award of substantial damages against us. In the event of a successful claim of infringement or misappropriation against us, we may be required to pay damages and obtain one or more

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licenses from third parties, or be prohibited from commercializing certain tests, all of which could have a material adverse impact on our cash position and business and financial condition.

If licenses to third-party intellectual property rights are or become required for us to engage in our business, we may be unable to obtain them at a reasonable cost, if at all. Even if such licenses are available, we could incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins. Moreover, we could encounter delays in the introduction of tests while we attempt to develop alternatives. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing tests, which could materially affect our ability to grow and thus adversely affect our business and financial condition.

Developments in patent law could have a negative impact on our business.

We believe that naturally occurring DNA sequences should not be patentable, and we do not currently have any patents or patent applications directed to such sequences nor have we in-licensed such patents rights of any third party. In this regard, a few key cases involving diagnostic method claims and "gene patents" have recently been decided by the U.S. Supreme Court. On March 20, 2012, the U.S. Supreme Court issued a decision in Mayo Collaborative v. Prometheus Laboratories, or Mayo, a case involving patent claims directed to optimizing on a patient-specific basis the dosage of a certain drug by measuring its metabolites in a patient. In Mayo, the U.S. Supreme Court determined that patent claims directed at detection of natural correlations, such as the correlation between drug metabolite levels in a patient and that drug's optimal dosage for such patient, are not eligible for patent protection. The Mayo Court held that claims based on this type of comparison between an observed fact and an understanding of that fact's implications represent attempts to patent a natural law and, moreover, when the processes for making the comparison are not themselves sufficiently inventive, claims to such processes are similarly patent-ineligible. On June 13, 2013, the U.S. Supreme Court decided Association for Molecular Pathology v. Myriad Genetics, or Myriad, a case brought by multiple plaintiffs challenging the validity of certain patent claims held by Myriad relating to the breast cancer susceptibility genes BRCA1 and BRCA2. In Myriad, the U.S. Supreme Court held that genomic DNAs that have been isolated from, or have the same sequence as, naturally occurring samples, such as the DNA constituting the BRCA1 and BRCA2 genes or fragments thereof, are not eligible for patent protection. Instead, the Myriad Court held that only those complementary DNAs, or cDNAs, which have a sequence that differs from a naturally occurring fragment of genomic DNA may be patent eligible. Because it will be applied by other courts to all gene patents, the holding in Myriad also invalidates patent claims to other genes and gene variants. On June 19, 2014, the U.S. Supreme Court decided Alice Corporation v. CLS Bank (2014), or Alice, where it amplified its Mayo and Myriad decisions and clarified the analytical framework for distinguishing between patents that claim laws of nature, natural phenomena and abstract ideas and those that claim patent-eligible applications of such concepts. According to the Alice Court, the analysis depends on whether a patent claim directed to a law of nature, a natural phenomenon or an abstract idea contains additional elements, an "inventive concept," that "is 'sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself"' (citing Mayo).

Although we view the Mayo, Myriad and Alice cases as aligned with our belief that naturally occurring DNA sequences should not be patentable, it is possible that subsequent determinations by the U.S. Supreme Court or other federal courts could limit, alter or potentially overrule the holdings of such cases. Moreover, from time to time the U.S. Supreme Court, other federal courts, the United States Congress or the U.S. Patent and Trademark Office, or USPTO, may change the standards of patentability, and any such changes could run contrary to, or otherwise be inconsistent with, our belief that naturally occurring DNA sequences should not be patentable.

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We cannot fully predict what impact the U.S. Supreme Court's decisions in Mayo, Myriad and Alice may have on the ability of various third parties, including competitors with substantial resources, to obtain or enforce patents relating to genes, genomic discoveries or genetic testing services currently or in the future. The Mayo, Myriad and Alice decisions are relatively new, and the precise contours of patent eligibility with respect to claims to laws of nature, natural phenomena or abstract ideas are not yet fully settled and may take many years to develop, including through further interpretation in the courts. There are many patents claiming testing methods based on similar or related correlations that issued before Mayo, and although some or many of these patents may be invalid under the standard set forth in Mayo, until successfully challenged, these patents may be entitled to a presumption of validity and enforceability in litigation, and certain third parties could allege that we infringe, or request that we obtain a license to, these patents. Whether based on patents issued prior to or after Mayo, we could have to defend ourselves against claims of patent infringement, or choose to license rights, if available, under patents claiming such methods. Moreover, although the U.S. Supreme Court has held in Myriad that isolated genomic DNA is not patent-eligible subject matter, certain third parties could allege that activities that we may undertake infringe other classes of gene-related patent claims, and we could have to defend ourselves against these claims by asserting non-infringement or invalidity positions, or pay to obtain a license to these claims. In any of the foregoing or in other situations involving third-party intellectual property rights, if we are unsuccessful in defending against claims of patent infringement, we could be forced to pay damages or be subjected to an injunction that would prevent us from utilizing the patented subject matter in question if we are unable to obtain a license on reasonable terms. Such outcomes could materially affect our ability to offer our tests and have a material adverse impact on our business. Even if we are able to obtain a license or successfully defend against claims of patent infringement, the cost and distraction associated with the defense or settlement of these claims could have a material adverse impact on our business.

With respect to our own patent protection, recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of any patent applications and the enforcement or defense of any patents that issue. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art, may affect patent litigation and switch the U.S. patent system from a "first-to-invent" system to a "first-to-file" system. Under a "first-to-file" system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO has developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, including in particular the first-to-file provisions, became effective on March 16, 2013. Among other changes to the patent laws are features that limit where a patentee may file a patent infringement suit and that provide opportunities for third parties to challenge any issued patent in the USPTO. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any patents that issue, all of which could harm our business and financial condition. In addition, further patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and defense of patent applications and any patents we may obtain.

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Our inability to effectively protect our proprietary technologies, including the confidentiality of our trade secrets, could harm our competitive position.

We currently rely upon trade secret protection and copyright, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants and third-parties, and to a limited extent patent protection, to protect our confidential and proprietary information. Although our competitors have utilized and are expected to continue utilizing similar methods and have aggregated and are expected to continue to aggregate similar databases of genetic testing information, our success will depend upon our ability to develop proprietary methods and databases and to defend any advantages afforded to us by such methods and databases relative to our competitors. If we do not protect our intellectual property adequately, competitors may be able to use our methods and databases and thereby erode any competitive advantages we may have.

We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. In this regard, we have applied, and we intend to continue applying, for patents covering such aspects of our technologies as we deem appropriate. However, we expect that potential patent coverage we may obtain will not be sufficient to prevent substantial competition. In this regard, we believe it is probable that others will independently develop similar or alternative technologies or design around technologies for which we may obtain patent protection. In addition, any patent applications we file may be challenged and may not result in issued patents or may be invalidated or narrowed in scope after they are issued. Questions as to inventorship or ownership may also arise. Any finding that our patents or applications are unenforceable could harm our ability to prevent others from practicing the related technology, and a finding that others have inventorship or ownership rights to our patents and applications could require us to obtain certain rights to practice related technologies, which may not be available on favorable terms, if at all. If we initiate lawsuits to protect or enforce our patents, or litigate against third party claims, which would be expensive, and, if we lose, we may lose some of our intellectual property rights. Furthermore, these lawsuits may divert the attention of our management and technical personnel.

We expect to rely primarily upon trade secrets and proprietary know-how protection for our confidential and proprietary information, and we have taken security measures to protect this information. These measures, however, may not provide adequate protection for our trade secrets, know-how, or other confidential information. Among other things, we seek to protect our trade secrets and confidential information by entering into confidentiality agreements with employees and consultants. There can be no assurance that any confidentiality agreements that we have with our employees and consultants will provide meaningful protection for our trade secrets and confidential information or will provide adequate remedies in the event of unauthorized use or disclosure of such information. Accordingly, there also can be no assurance that our trade secrets will not otherwise become known or be independently developed by competitors. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.

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We may not be able to enforce our intellectual property rights throughout the world.

The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant challenges in establishing and enforcing their proprietary rights outside of the United States. These challenges can be caused by the absence of rules and methods for the establishment and enforcement of intellectual property rights outside of the United States. In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to healthcare. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.

Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.

We employ individuals who were previously employed at universities or genetic testing, diagnostic or other healthcare companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees or consultants have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Further, we may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our intellectual property. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Risks related to being a public company

We will incur increased costs and demands on management as a result of compliance with laws and regulations applicable to public companies, which could harm our operating results.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the New York Stock Exchange, or NYSE, impose a number of requirements on public companies, including with respect to corporate governance practices. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was

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enacted. There are significant corporate governance and executive-compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas. Our management and other personnel will need to devote a substantial amount of time to these compliance and disclosure obligations. If these requirements divert the attention of our management and personnel from other aspects of our business concerns, they could have a material adverse effect on our business, financial condition and results of operations. Moreover, these rules and regulations applicable to public companies will substantially increase our legal, accounting and financial compliance costs, require that we hire additional personnel and make some activities more time-consuming and costly. We also expect that it will be more expensive for us to obtain director and officer liability insurance. We cannot predict or estimate the amount or timing of additional costs we may incur to comply with these requirements.

If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.

As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the year ending December 31, 2015, provide a management report on our internal control over financial reporting. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 of the Sarbanes-Oxley Act. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion.

During the evaluation and testing process, if we identify one or more material weaknesses in our internal controls, our management will be unable to conclude that our internal control over financial reporting is effective. Moreover, when we are no longer an emerging growth company, our independent registered public accounting firm will be required to issue an attestation report on the effectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.

If we are unable to conclude that our internal control over financial reporting is effective, or when we are no longer an emerging growth company, if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures, which could cause the price of our common stock to decline. Internal control deficiencies could also result in the restatement of our financial results in the future.

We are an emerging growth company and may elect to comply with reduced public company reporting requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an emerging growth company, as defined under the Securities Act of 1933, or the Securities Act. We will remain an emerging growth company for up to five years, although if our revenue exceeds $1 billion in any fiscal year before that time, we would cease to be an emerging growth company as of the end of that fiscal year. In addition, if the market value of our common stock that is held by non-affiliates

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exceeds $700 million as of the last business day of our second fiscal quarter of any fiscal year before the end of that five-year period, we would cease to be an emerging growth company as of December 31 of that year. As an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to certain other public companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced financial statement and financial-related disclosures, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirement of holding a nonbinding advisory vote on executive compensation and obtaining stockholder approval of any golden parachute payments not previously approved by our stockholders. We cannot predict whether investors will find our common stock less attractive if we choose to rely on any of these exemptions. If investors find our common stock less attractive as a result of any choices to reduce future disclosure we may make, there may be a less active trading market for our common stock and our stock price may be more volatile

Risks related to this offering and our common stock

If an active, liquid trading market for our common stock does not develop, you may not be able to sell your shares of our common stock.

Prior to this offering, there has been no public market for our common stock, and an active and liquid trading market for our stock may not develop or be sustained after this offering. You may not be able to sell your shares quickly or at or above the market price if trading in our common stock is not active. Further, an inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to enter into strategic partnerships or acquire businesses, products or technologies using our common stock as consideration. We and the representatives of the underwriters have determined the initial public offering price of our common stock through negotiation. This price may not necessarily reflect the price at which investors in the market will be willing to buy our stock following this offering, and you may not be able to sell your shares of our common stock at or above the initial offering price.

Our stock price may be volatile, and you may not be able to sell shares of our common stock at or above the price you paid.

The trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include:

actual or anticipated fluctuations in our operating results;

competition from existing tests or new tests that may emerge;

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments;

failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

issuance of new or updated research or reports by securities analysts or changed recommendations for our stock;

our focus on long term goals over short term results;

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the timing of our investments in the growth of our business;

actual or anticipated changes in regulatory oversight of our business;

additions or departures of key management or other personnel;

disputes or other developments related to our intellectual property or other proprietary rights, including litigation;

changes in reimbursement by current or potential payors; and

general economic and market conditions.

In addition, the stock market in general, and the market for stock of life sciences companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or indicate an intent to sell, substantial amounts of our common stock in the public market after the 180-day contractual lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline significantly and could decline below the initial public offering price. Based on                           shares outstanding as of October 31, 2014, upon the completion of this offering, we will have                           outstanding shares of common stock, assuming no exercise of outstanding options. Of these shares,                            shares of common stock, plus any shares sold pursuant to the underwriters' option to purchase additional shares, will be immediately freely tradable, without restriction, in the public market. J.P. Morgan Securities LLC, however, may, in its discretion, permit our officers, directors and other stockholders who have entered to lock-up agreements in connection with this offering to sell shares prior to the expiration of the lock-up agreements.

After the lock-up agreements pertaining to this offering expire and based on                   shares outstanding as of October 31, 2014, an additional                           shares will be eligible for sale in the public market. In addition, upon issuance, the                           shares subject to outstanding options under our stock option plans, the                           shares reserved for future issuance under our stock incentive plans and the                           shares reserved for future issuance under our employee stock purchase plan will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. Moreover, 180 days after the completion of this offering, holders of approximately                           shares of our common stock will have the right to require us to register these shares under the Securities Act pursuant to an investors' rights agreement. If our existing stockholders sell substantial amounts of our common stock in the public market, or if the public perceives that such sales could occur, this could have an adverse effect on the market price of our common stock.

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We will have broad discretion in how we use the net proceeds of this offering. We may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.

We will have considerable discretion in the application of the net proceeds of this offering, including for any of the purposes described in the section entitled "Use of Proceeds." We intend to use the net proceeds from this offering primarily for general corporate purposes, including working capital, research and development activities, selling and marketing activities, general and administrative matters and capital expenditures. As a result, investors will be relying upon management's judgment with only limited information about our specific intentions for the use of the net proceeds of this offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

We have never paid dividends on our capital stock and we do not anticipate paying dividends in the foreseeable future.

We have never paid dividends on any of our capital stock and currently intend to retain any future earnings to fund the growth of our business. In addition, we may enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2013, our total gross deferred tax assets were $13.8 million. Due to our lack of earnings history and uncertainties surrounding our ability to generate future taxable income, the net deferred tax assets have been fully offset by a valuation allowance. The deferred tax assets were primarily comprised of federal and state tax net operating losses and tax credit carryforwards. Furthermore, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset its future taxable income may be limited. In general, an "ownership change" occurs if there is a cumulative change in our ownership by "5% shareholders" that exceeds 50 percentage points over a rolling three-year period. Our existing NOLs and tax credit carryovers may be subject to limitations arising from previous ownership changes, and if we undergo one or more ownership changes in connection with our initial public offering or future transactions in our stock, our ability to utilize NOLs and tax credit carryovers could be further limited by Section 382 of the Internal Revenue Code. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss and tax credit carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. The annual limitation may result in the expiration of certain net operating loss and tax credit carryforwards before their utilization. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

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Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur immediate dilution of $              in net tangible book value per share from the price you paid, based on the assumed initial public offering price of $              per share. In addition, new investors who purchase shares in this offering will contribute approximately          % of the total amount of equity capital raised by us through the date of this offering, but will only own approximately         % of the outstanding equity capital. The exercise of outstanding options will result in further dilution. For a detailed description of the dilution that you will experience immediately after this offering, see "Dilution."

Insiders will exercise significant control over our company and will be able to influence corporate matters.

Our directors, executive officers, 5% or greater stockholders and their affiliates beneficially owned, in the aggregate, approximately 77% of our outstanding capital stock as of October 31, 2014. Upon the completion of this offering, and assuming they do not purchase shares in this offering, this same group will hold approximately          % of our outstanding capital stock. As a result, these stockholders will be able to exercise significant influence over all matters submitted to our stockholders for approval, including the election of directors and approval of significant corporate transactions, such as a merger or sale of our company or its assets. This concentration of ownership may have the effect of delaying or preventing a third party from acquiring control of our company and could adversely affect the market price of our common stock.

If securities or industry analysts issue an adverse opinion regarding our stock or do not publish research or reports about our company, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts or the content and opinions included in their reports. Securities analysts may elect not to provide research coverage of our company after the closing of this offering, and such lack of research coverage may adversely affect the market price of our common stock. The price of our common stock could also decline if one or more equity research analysts downgrade our common stock or issue other unfavorable commentary or cease publishing reports about us or our business. If one or more equity research analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

Anti-takeover provisions in our charter documents and under Delaware law could discourage, delay or prevent a change in control and may affect the trading price of our common stock.

Provisions in our restated certificate of incorporation and our amended and restated bylaws to become effective upon the completion of this offering may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and amended and restated bylaws include provisions that:

authorize our board of directors to issue, without further action by the stockholders, up to                  shares of undesignated preferred stock;

require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

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specify that special meetings of our stockholders can be called only by our board of directors, our chairman of the board, or our chief executive officer;

establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms;

provide that our directors may be removed only for cause;

provide that vacancies on our board of directors may, except as otherwise required by law, be filled only by a majority of directors then in office, even if less than a quorum; and

require a super-majority of votes to amend certain of the above-mentioned provisions as well as to amend our bylaws generally.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. Section 203 generally prohibits us from engaging in a business combination with an interested stockholder subject to certain exceptions.

Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for:

any derivative action or proceeding brought on our behalf;

any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders;

any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or

any action asserting a claim against us governed by the internal affairs doctrine.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the provisions of our certificate of incorporation described above. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

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Special note regarding forward-looking statements

This prospectus includes forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "design," "intend," "expect" or the negative version of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section entitled "Risk Factors." In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements and you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

our views regarding the future of genetic testing and its role in mainstream medical practice;

strategic plans for our business, products and technology, including our ability to expand our tests while maintaining attractive pricing, further enhance our genetic testing process and the related user experience, build interest in and demand for our tests (including by driving traffic to our website) and attract potential partners;

the implementation of our business model;

the rate and degree of market acceptance of our tests and genetic testing generally;

our ability to scale our infrastructure and operations in a cost-effective manner;

the timing and results of studies with respect to our tests;

our expectations regarding our size and growth in potential markets;

developments and projections relating to our competitors and our industry;

the degree to which individuals will share genetic information generally, as well as share any related potential economic opportunities with us;

our commercial plans, including our sales and marketing expectations;

our ability to obtain and maintain adequate reimbursement for our tests;

regulatory developments in the United States and foreign countries;

our ability to retain key scientific or management personnel;

our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

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our ability to obtain funding for our operations;

our financial performance;

our estimates of our revenue, cost of revenue, operating expenses and future capital requirements; and

our anticipated uses of the net proceeds from this offering.

Although we believe that the expectations and assumptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Any forward-looking statement made by us in this prospectus speaks only as of the date on which it is made. We disclaim any duty to update any of these forward-looking statements after the date of this prospectus to confirm these statements to actual results or revised expectations.

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Use of proceeds

We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $               million, based on an assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters' option to purchase additional shares from us is exercised in full, we estimate that we will receive additional net proceeds of $               million, based upon the same assumed initial offering price. A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us by $               million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) the net proceeds to us by $               million, assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to obtain additional capital to support our operations, increase our visibility in the marketplace, establish a public market for our common stock and facilitate our future access to the public capital markets. As of the date of this prospectus, we cannot specify with certainty the particular uses for the net proceeds to be received by us in this offering. However, we anticipate that we will use the net proceeds from this offering primarily for general corporate purposes, including working capital, research and development activities, selling and marketing activities, general and administrative matters and capital expenditures.

We may also use a portion of the net proceeds from this offering to license, acquire or invest in complementary business, technologies, products or assets. However, we have no current plans, commitments or obligations to do so.

Although it is difficult to predict future liquidity requirements, we believe that our existing cash and cash equivalents as of June 30, 2014, along with the proceeds from the sale of Series F convertible preferred stock in August and October of 2014 and the estimated net proceeds from this offering, will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

The expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures depend on numerous factors, including the number of our billable tests, our success in obtaining reimbursement, our ability to lower the costs associated with performing our tests and investments in our business. We cannot specify with certainty the particular uses for the net proceeds to be received by us from this offering, and our management team will have broad discretion in using the net proceeds to be received by us from this offering. Pending the use of proceeds from this offering as described above, we plan to invest the net proceeds in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

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Dividend policy

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

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Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2014, as follows:

on an actual basis;

on a pro forma basis to give effect to the issuance of an aggregate of 60,000,000 shares of our Series F convertible preferred stock in August and October 2014 and the automatic conversion of all outstanding shares of our convertible preferred stock as of June 30, 2014 and the Series F convertible preferred stock into an aggregate of 141,131,524 shares of our common stock immediately prior to the completion of this offering; and

on a pro forma as adjusted basis to give further effect to the receipt of the estimated net proceeds from the sale of                   shares of common stock in this offering at a price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

You should read this table in conjunction with "Selected consolidated financial and other data" and "Management's discussion and analysis of financial condition and results of operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

   
 
  As of June 30, 2014  
(In thousands, except share and per share data)
  Actual
  Pro forma
  Pro forma
as adjusted(1)

 

 

 

                   
 
  (Unaudited)
 

Cash and cash equivalents

  $ 22,039   $     $    
       

Capital lease obligation

    1,598              

Convertible preferred stock, par value $0.0001 per share: 81,131,537 shares authorized, 81,131,524 issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

    86,574              

Stockholders' equity (deficit):

                   

Preferred stock, par value $0.0001 per share: no shares authorized, issued or outstanding, actual or pro forma;              shares authorized, no shares issued or outstanding pro forma as adjusted

                 

Common stock, par value $0.0001 per share: 98,131,537 shares authorized, 5,229,662 shares issued and outstanding, actual;              shares authorized, 146,361,186 shares issued and outstanding, pro forma;              shares issued and outstanding, pro forma as adjusted

                 

Additional paid-in capital

    874              

Accumulated deficit

    (57,260 )            
       

Total stockholders' equity (deficit)

    (56,386 )            
       

Total capitalization

  $ 31,786   $     $    
   

(1)    A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total

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capitalization and total stockholders' equity (deficit) by $               million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total capitalization and total stockholders' equity (deficit) by approximately $               million, assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

If the underwriters' exercise their option to purchase additional shares in full, pro forma as adjusted cash and cash equivalents, common stock, additional paid-in capital, total stockholders' equity (deficit) and shares issued and outstanding as of June 30, 2014 would be $              , $              , $              , $              and                           , respectively.

The number of shares of common stock in the table above is based on 146,361,186 shares outstanding as of June 30, 2014, after giving effect to the automatic conversion immediately prior to the completion of this offering of all outstanding shares of our convertible preferred stock into an aggregate of 141,131,524 shares of common stock (which includes an aggregate of 60,000,000 shares of common stock issuable upon the conversion of Series F convertible preferred stock issued in August and October 2014), and excludes:

9,197,772 shares of common stock issuable upon the exercise of options outstanding as of June 30, 2014, at a weighted-average exercise price of $0.38 per share;

240,446 shares of common stock issued in connection with the early exercise of options, which are subject to our right of repurchase as of June 30, 2014;

2,332,124 shares of common stock reserved for future issuance under our 2010 Stock Plan as of June 30, 2014, plus an additional 2,000,000 shares of common stock added to such reserve in connection with the issuance of Series F convertible preferred stock in August 2014;

              shares of common stock, subject to increase on an annual basis, reserved for future issuance under our 2015 Stock Plan, which will become effective in connection with this offering; and

              shares of common stock, subject to an increase on an annual basis, reserved for future issuance under the ESPP, which will become effective in connection with this offering.

Subsequent to June 30, 2014 through October 31, 2014, we granted options to purchase 3,640,000 shares of common stock at an exercise price of $1.45 per share.

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Dilution

If you purchase our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

Our net tangible book deficit of our common stock as of June 30, 2014 was approximately $                     million, or approximately $                     per share, based on 5,229,662 shares of common stock outstanding as of June 30, 2014. Net tangible book value per share is determined by dividing the number of shares of common stock outstanding as of June 30, 2014 into our total tangible assets (total assets less intangible assets) less total liabilities and convertible preferred stock.

On a pro forma basis, after giving effect to the sale of an aggregate of 60,000,000 shares of our Series F convertible preferred stock in August and October 2014 at $2.00 per share and the automatic conversion of 141,131,524 shares of convertible preferred stock into common stock which will occur immediately prior to the completion of this offering, our pro forma net tangible book value as of June 30, 2014 would have been $               million, or $              per share.

On a pro forma as adjusted basis, after giving additional effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $              per share, the midpoint of the price range set forth on the front cover of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of June 30, 2014 would have been $               million, or $              per share. This represents an immediate increase in pro forma net tangible book value of $              per share to existing stockholders and an immediate dilution of $              per share to new investors purchasing shares in this offering, as illustrated by the following table:

   

Assumed initial public offering price per share

        $    

Pro forma net tangible book value per share as of June 30, 2014

  $          

Increase in pro forma net tangible book value per share attributable to new investors

             
             

Pro forma as adjusted net tangible book value per share after this offering

             
             

Dilution per share to investors in this offering

        $    
   

A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) our pro forma as adjusted net tangible book value by approximately $               million, or approximately $              per share, and the pro forma dilution per share to investors in this offering by approximately $              , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) pro forma as adjusted net tangible book value by approximately $               million, or $              per share, and the pro forma dilution per share to investors in this offering by $              . The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial public offering price, the number of shares we sell in this offering and other terms of this offering.

If the underwriters' option to purchase additional shares from us is exercised in full, the pro forma as adjusted net tangible book value per share after this offering would be $              per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $              per share and the dilution to new investors purchasing shares in this offering would be $              per share.

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The following table presents, on a pro forma as adjusted basis as of June 30, 2014, the differences between existing stockholders and purchasers of shares in this offering with respect to the number of shares purchased from us, the total consideration paid or to be paid and the average price paid per share assuming with respect to the purchasers of shares in this offering an initial public offering price of $              per share, the midpoint of the price range on the cover of this prospectus before deducting estimated underwriting discounts and commissions and estimated expenses payable by us:

   
 
   
   
  Total
consideration
   
 
 
  Total shares    
 
 
  Average price
per share

 
 
  Number
  Percent
  Amount
  Percent
 
   

Existing stockholders before this offering

          %   $       %   $    

Investors participating in this offering

                          $    
             

Total

          100%   $       100%        
         

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid to us by new investors and total consideration paid to us by all stockholders by $               million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) the total consideration paid to us by new investors and total consideration paid to us by all stockholders by $               million, assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters' option to purchase additional shares is exercised in full, existing stockholders would own         % and new investors would own         % of the total number of shares of our common stock outstanding immediately after this offering.

The foregoing is based on 146,361,186 shares outstanding as of June 30, 2014 after giving effect to the automatic conversion immediately prior to the completion of this offering of all outstanding shares of our convertible preferred stock into an aggregate of 141,131,524 shares of common stock (which includes an aggregate of 60,000,000 shares of common stock issuable upon the conversion of Series F convertible preferred stock issued in August and October 2014), and excludes:

9,197,772 shares of common stock issuable upon the exercise of options outstanding as of June 30, 2014, at a weighted-average exercise price of $0.38 per share;

240,446 shares of common stock issued in connection with the early exercise of options, which are subject to our right of repurchase as of June 30, 2014;

2,332,124 shares of common stock reserved for future issuance under our 2010 Stock Plan as of June 30, 2014, plus an additional 2,000,000 shares of common stock added to such reserve in connection with the issuance of Series F convertible preferred stock in August 2014;

              shares of common stock, subject to increase on an annual basis, reserved for future issuance under our 2015 Stock Plan, which will become effective in connection with this offering; and

              shares of common stock, subject to an increase on an annual basis, reserved for future issuance under the ESPP.

Subsequent to June 30, 2014 through October 31, 2014, we granted options to purchase 3,640,000 shares of common stock at an exercise price of $1.45 per share. To the extent that any outstanding options are exercised or new options are issued under our 2010 Stock Plan, there will be further dilution to investors participating in this offering.

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Selected consolidated financial and other data

We derived the selected consolidated statements of operations data for the years ended December 31, 2012 and 2013 and the selected consolidated balance sheets data as of December 31, 2012 and 2013 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the selected consolidated statements of operations data for the six months ended June 30, 2013 and 2014 and the selected consolidated balance sheet data as of June 30, 2014 from our unaudited interim condensed consolidated financial statements and related notes included elsewhere in this prospectus. Our unaudited interim condensed consolidated financial statements were prepared on the same basis as our audited consolidated financial statements and include, in our opinion, all adjustments, consisting of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those consolidated financial statements. Historical results are not necessarily indicative of the results that may be expected in the future. You should read the selected consolidated financial data together with "Management's discussion and analysis of financial condition and results of operations" and our consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. The selected consolidated financial data is qualified in its entirety by the consolidated financial statements and related notes included elsewhere in this prospectus.

   
 
  Year ended December 31,   Six months ended June 30,  
(In thousands, except share, per share and other operating data)
 
  2012
  2013
  2013
  2014
 
   
 
   
   
  (Unaudited)
 

Consolidated statements of operations data:

                         

Revenue

  $   $ 148   $ 6   $ 419  

Costs and operating expenses:

                         

Cost of revenue(1)

        667     252     1,574  

Research and development(1)

    5,557     16,039     6,165     10,043  

Selling and marketing(1)

        2,431     934     3,437  

General and administrative(1)

    3,004     5,764     2,290     4,900  
       

Total costs and operating expenses

    8,561     24,901     9,641     19,954  
       

Loss from operations

    (8,561 )   (24,753 )   (9,635 )   (19,535 )

Other income (expense), net

    2     (26 )   2     (3 )

Interest expense

    (43 )   (59 )   (30 )   (34 )
       

Net loss

  $ (8,602 ) $ (24,838 ) $ (9,663 ) $ (19,572 )
       

Net loss attributable to common stockholders(2)

  $ (9,014 ) $ (24,989 ) $ (9,814 ) $ (19,572 )
       

Net loss per share attributable to common stockholders, basic and diluted(2)

  $ (2.36 ) $ (6.02 ) $ (2.43 ) $ (4.15 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted(2)

    3,814,255     4,150,519     4,040,221     4,716,280  

Pro forma net loss per share attributable to common stockholders, basic and diluted(2)

        $ (0.41 )       $ (0.23 )
                       

Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted(2)

          60,977,738           85,847,804  
   

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  Year ended
December 31,
  Six months ended
June 30,
 
 
  2012
  2013
  2013
  2014
 
   

Other operating data:

                         

Billable tests

        229     73     702  
   

(1)    Includes stock-based compensation as follows:

 
   
   
  (Unaudited)
 
 
  Year ended
December 31,
  Six months ended
June 30,
 
(In thousands)
  2012
  2013
  2013
  2014
 
   

Cost of revenue

  $   $ 11   $ 4   $ 24  

Research and development

    46     165     53     148  

Selling and marketing

        42     13     55  

General and administrative

    19     42     13     97  
       

Total stock-based compensation

  $ 65   $ 260   $ 83   $ 324  
   

(2)    See Notes 2 and 10 to our audited consolidated financial statements and Note 6 of our unaudited condensed consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share attributable to common stockholders and basic and diluted pro forma net loss per share attributable to common stockholders.

   
 
  As of December 31,    
 
 
  As of June 30,
2014

 
(In thousands)
  2012
  2013
 
   
 
   
   
  (Unaudited)
 

Consolidated balance sheet data:

                   

Cash and cash equivalents

  $ 21,801   $ 43,070   $ 22,039  

Working capital

    21,043     41,577     20,785  

Total assets

    25,973     53,103     34,148  

Capital lease obligations

    1,215     2,001     1,598  

Convertible preferred stock

    36,755     86,574     86,574  

Accumulated deficit

    (12,850 )   (37,688 )   (57,260 )

Total stockholders' deficit

    (12,759 )   (37,280 )   (56,386 )
   

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Management's discussion and analysis of financial condition and results of operations

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Selected consolidated financial data" and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled "Risk factors" included elsewhere in this prospectus.

Overview

Our mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Our goal is to aggregate most of the world's genetic tests into a single service with higher quality, faster turnaround time and lower price than many single gene tests today. By aggregating large numbers of currently available genetic tests into a single service, we can achieve great economies of scale that allow us to not only provide primary single gene or multi-gene tests but also to generate and store additional genetic information on behalf of the patient for future use. We refer to the service of managing genetic information over the course of disease or the lifetime of a patient as "genome management." In addition, as more individuals gain access to their genetic information, we believe that sharing genetic information will provide an economic opportunity for patients and us to participate in advancing the understanding and treatment of disease.

From our inception through October 31, 2014, we raised an aggregate of $207.0 million in equity financing, established the infrastructure necessary to launch our service and were primarily focused on the research and development of our initial assay. We launched our first commercial offering in late November 2013, an assay of 216 genes comprising 85 different genetic disorders and 17 targeted panels, and began selling and marketing our panels with a focused effort on hereditary cancers, including breast, colon and pancreatic cancer. We charge $1,500 per sample in most cases with the flexibility for our clients to order any subset of genes or multi-gene panels from our online ordering system for a given indication. We also currently offer a free re-requisition of additional data within the same indication when ordered within 90 days of the date of service. Importantly, we are providing turnaround time of less than three weeks for the substantial majority of our tests. Since our initial launch, we have marketed additional panels based on the same assay of 216 genes.

We have experienced rapid growth in recent periods. Our revenue increased from $0 in 2012 to $0.1 million in 2013. Our revenue increased from $6,000 for the six months ended June 30, 2013 to $0.4 million for the six months ended June 30, 2014. We incurred a net loss of $8.6 million and $24.8 million for the years ended December 31, 2012 and 2013, respectively, and $9.7 million and $19.6 million for the six months ended June 30, 2013 and 2014, respectively. As of June 30, 2014, we had an accumulated deficit of $57.3 million. We are growing our volume rapidly and, since our commercial launch, we have delivered more than 2,000 billable tests as of September 30, 2014. Sales of our tests have grown significantly in 2014 from over 200 tests in the first quarter of 2014 to over 1,000 tests in the third quarter of 2014, which we believe is evidence that our value proposition is attractive to our clients. We estimate that the U.S. market for hereditary cancer tests is greater than $650 million per year and thus represents a key growth opportunity for us. From inception through September 30, 2014, approximately

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26% of billable tests have been paid. We also increased our number of employees from 44 at January 1, 2013 to 144 employees as of October 31, 2014. As discussed in greater detail in "—Factors affecting our performance," we intend to continue to invest aggressively in our business and to incur additional expenditures as a public company. As a result of these and other factors, we expect to incur operating losses for the foreseeable future and may need to raise additional capital in order to fund our operations. If we are unable to achieve our revenue growth objectives and successfully manage our costs, we may not be able to achieve profitability.

We believe that the keys to our future growth will be to steadily increase the amount of genetic content we offer, consistently improve the client experience, drive physician and patient utilization of our website for ordering and delivery of results, increase the number of partners working with us to add value for our clients and consistently drive down the price per gene for genetic analysis and interpretation.

Factors affecting our performance

Number of billable tests

The growth in our genetic testing business is tied to the number of tests for which we bill third-party payors, institutions or patients. We bill for our services following delivery of the billable test report derived from testing samples and interpreting the results. We incur the expenses associated with a test in the period in which the test is processed regardless of when payment is received with respect to that test.

Success obtaining reimbursement

Our ability to increase the number of billable tests and our revenue will depend on our success achieving broad reimbursement coverage for our tests from third-party payors. Reimbursement may depend on a number of factors, including a payor's determination that a test is appropriate, medically necessary and cost-effective. Because each payor makes its own decision as to whether to establish a policy or enter into a contract to reimburse for our testing services, seeking these approvals is a time-consuming and costly process. In addition, physicians may decide not to order our tests if the cost of the test is not covered by insurance. Because we require an ordering physician to requisition a test, our revenue growth also depends on our ability to successfully promote the adoption of our testing services and expand our base of ordering physicians. We believe that establishing coverage from third-party payors, including the Center for Medicare and Medicaid Services, or CMS, is an important factor in gaining adoption by ordering physicians. If we are not able to obtain and maintain adequate reimbursement from third-party payors for our testing services and expand the base of physicians ordering our tests, we may not be able to effectively increase the number of billable tests or our revenue.

Ability to lower the costs associated with performing our tests

Reducing the costs associated with performing our genetic tests is both a near-term focus and a strategic objective of ours. Over the long term we will need to reduce the cost of raw materials by improving the output efficiency of our assay and lab processes, modifying our platform-agnostic assay and lab processes to use materials and technologies that provide equal or greater quality at lower cost, and improving how we manage our inventory and negotiating favorable terms for our materials purchases. We also intend to design and implement hardware and software tools that will reduce personnel cost for both laboratory and clinical operations by increasing personnel efficiency and thus lowering labor costs per test.

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Investment in our business and timing of expenses

We plan to continue to invest significantly in our genetic testing, genome management and genome network business. We deploy state-of-the-art and costly technologies in our genetic testing services, and we intend to significantly scale our infrastructure, including our testing capacity and information systems. We also expect to incur software development costs as we seek to further automate our laboratory processes and genetic interpretation and report sign-out procedures, conduct ongoing research and development activities, scale our customer service capabilities and expand the functionality of our website. As part of our growth, we also plan to hire additional personnel, including software engineers, sales and marketing personnel, research and development personnel, medical specialists, biostatisticians and geneticists. In addition, we expect to incur additional expenses as a result of operating as a public company. The expenses we incur may vary significantly by quarter depending, for example, on when large equipment purchases are made or significant hiring takes place, and as we focus on building out different aspects of our business.

How we recognize revenue

Our historical revenue has been recognized when cash is received. We do not expect to recognize significant amounts of revenue on an accrual basis for some period of time. Until we achieve and maintain a predictable pattern of collection at a consistent payment amount from a large number of payors, we will continue to recognize the substantial majority of our revenue when cash is received. Additionally, as we commercialize new test offerings, we will need to achieve a predictable pattern of collection at a consistent payment amount for each payor for each new product offering prior to being able to recognize the related test revenue on an accrual basis. Because the timing and amount of cash payments received from payors is difficult to predict, we expect that our revenue will fluctuate significantly in any given quarter.

For the year ended December 31, 2013 and for the six-months ended June 30, 2014, amounts billed for tests delivered totaled $0.3 million and $1.1 million, respectively. It is difficult to predict future revenue from previously delivered but unpaid tests. Accordingly, we cannot provide any assurance as to when, if ever, or to what extent any of these amounts will be collected. Because we are in the early stages of commercializing our tests, we have had limited payment and collection history. Notwithstanding our efforts to obtain payment for these tests, payors may deny our claims, in whole or in part, and we may never receive revenue from any previously delivered but unpaid tests. Revenue from these tests, if any, may not be equal to the billed amount due to a number of factors, including differences in reimbursement rates, the amounts of patient co-payments, the existence of secondary payors and claims denials.

We incur and recognize expenses for tests in the period in which the test is conducted and recognize revenue for tests in the period in which our revenue recognition criteria are met. Accordingly, any revenue that we receive in respect of previously delivered but unpaid tests will favorably impact our liquidity and results of operations in future periods.

Financial overview

Revenue

We generate revenue from the sale of our tests which provide the analysis and associated interpretation of the sequencing of parts of the genome. Clients are billed upon delivery of test results to the physician. As we do not have sufficient history of collection and are not yet able to determine a predictable pattern of collection, we currently recognize revenue when cash is received. Our ability to increase our revenue will depend on our ability to increase our market penetration, obtain contracted reimbursement coverage from third-party payors and increase the rate at which we are paid for tests performed.

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Cost of revenue

Cost of revenue reflects the aggregate costs incurred in delivering test results to physicians and includes expenses for materials and supplies, personnel costs, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing our test are recorded as the patient's sample is processed regardless of whether and when revenue is recognized with respect to that test. As a result, our cost of revenue as percentage of revenue may vary significantly from period to period because we generally do not recognize revenue in the period in which costs are incurred. We expect cost of revenue to generally increase in line with the increase in the number of tests we perform. However, we expect that the cost per test will decrease over time due to the efficiencies we may gain as test volume increases and from automation and other cost reductions.

Operating expenses

Our operating expenses are classified into three categories: research and development, selling and marketing, and general and administrative. For each category, the largest component is personnel costs, which include salaries, employee benefit costs, bonuses, commissions, as applicable, and stock-based compensation expense.

    Research and development

Research and development expenses represent costs incurred to develop our technology and future tests, including costs associated with our efforts to expand the number of genes we can evaluate in our tests. These costs consist of personnel costs, laboratory supplies and equipment expenses, consulting costs and allocated overhead including rent, information technology, equipment depreciation and utilities.

We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses will substantially increase in absolute dollars in future periods as we continue to invest in research and development activities related to developing additional tests. We expect that in the next 12 months the substantial increase in research and development expenses will be for the continued development and support of our assay of 216 genes and other new testing services and programs under development.

    Selling and marketing

Selling and marketing expenses consist of personnel costs, client service expenses, direct marketing expenses, educational and promotional expenses, market research and analysis, and allocated overhead including rent, information technology, equipment depreciation and utilities. We expect our selling and marketing expenses to substantially increase over the next 12 months, primarily driven by the cost of hiring additional account executives and business development personnel associated with efforts to further penetrate the domestic market.

    General and administrative

General and administrative expenses include executive, finance and accounting, legal and human resources functions. These expenses include personnel-related costs, audit and legal expenses, consulting costs, and allocated overhead including rent, information technology, equipment depreciation and utilities. We expect our general and administrative expenses will increase as we scale our operations. We also expect to incur additional general and administrative expenses as a result of our initial public offering and operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and

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those of any national securities exchange on which our securities will be traded, additional insurance expenses, investor relations activities and other administration and professional services.

Other income (expense), net

Other income (expense), net primarily consists of the net exchange gain/loss on foreign currency transactions related to the operations of our subsidiary in Chile.

Interest expense

Interest expense is attributable to our financing obligation under our capital lease agreements in connection with the purchase of laboratory equipment.

Critical accounting policies and estimates

Management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

Revenue recognition

We generate revenue from delivery of test reports generated from our assay of 216 genes. Revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The assessment of the fixed or determinable nature of the fees charged for testing performed and the collectability of those fees require significant judgment by management. When evaluating these criteria, we consider whether we have sufficient history to reliably estimate a payor's payment pattern. We review the number of tests paid against the number of tests billed and the payor's outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. To date, we have not been able to demonstrate a predictable pattern of collectability, and therefore recognize revenue when payment is received following delivery of the report.

Stock-based compensation

Stock-based compensation expense is measured at the date of grant, based on the estimated fair value of the award and recognized as an expense over the employee's requisite service period on a straight-line basis. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model.

We account for stock-based compensation arrangements with non-employees using a fair value approach. The fair value of these options is measured using the Black-Scholes option-pricing model reflecting the same assumptions as applied to employee options in each of the reported periods, other than the expected

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life, which is assumed to be the remaining contractual life of the option. The compensation expenses of these arrangements are subject to remeasurement over the vesting terms as earned.

We recorded stock-based compensation expense of $65,000 and $0.3 million for the years ended December 31, 2012 and 2013, and $83,000 and $0.3 million for the six months ended June 30, 2013 and 2014. As of June 30, 2014, we had $2.4 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, which we expect to recognize over a weighted-average period of 3.3 years.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. These assumptions include:

Expected term—The expected term represents the period that stock-based awards are expected to be outstanding. We used the simplified method to determine the expected term, which is based on the mid-point between the vesting date and the end of the contractual term.

Expected volatility—Since we are privately held and do not have any trading history for our common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants. When selecting comparable publicly traded biopharmaceutical companies on which we based our expected stock price volatility, we selected companies with comparable characteristics to us, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of the stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Dividend yield—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

In addition to the Black-Scholes assumptions, we estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the adequacy of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior, and other factors. The impact from any forfeiture rate adjustment would be recognized in full in the period of adjustment and if the actual number of future forfeitures differs from our estimates, we might be required to record adjustments to stock-based compensation in future periods.

Historically, for all periods prior to this initial public offering, the fair values of the shares of common stock underlying our share-based awards were estimated on each grant date by our board of directors. In order to determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, contemporaneous valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Given the absence of a public trading market for our common stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including our stage of development; progress of our research and development efforts; our operating and financial performance, including our levels of available capital resources; the rights, preferences and privileges of our convertible preferred stock relative

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to those of our common stock; sales of our convertible preferred stock in arms'-length transactions; the valuation of publicly traded companies in our industry, as well as recently completed mergers and acquisitions of peer companies; equity market conditions affecting comparable public companies; and the lack of marketability of our common stock.

In determining a fair value for our common stock, we estimated the enterprise value of our business using the market approach or option pricing back-solve method. The estimated enterprise value is then allocated to the common stock using the Option Pricing Method, or OPM, and the Probability Weighted Expected Return Method, or PWERM, or the hybrid method. The hybrid method applied the PWERM utilizing the probability of two exit scenarios, going public or being acquired, and the OPM was utilized in the remaining private scenario.

Subsequent to December 31, 2013, we granted options to purchase shares of our common stock on February 28, 2014 and October 15, 2014 to the following executive officers: (1) Sean E. George, 300,000 shares on each date; (2) Lee Bendekgey, 50,000 shares and 150,000 shares, respectively; and (3) Lisa Alderson, 200,000 shares and 150,000 shares, respectively. Each option has an exercise price of $0.57 and $1.45 per share, respectively, which our board of directors determined to constitute at least 100% of the current fair market value of our common stock on the date of grant. In each of the periods presented, the exercise price per share for each stock option was the same as the fair value of our common stock on the date of grant as determined by our board of directors, other than with respect to options to purchase an aggregate of 2,940,000 shares of common stock granted in January and February 2014 and options to purchase an aggregate of 410,500 shares of common stock granted in May 2014. We subsequently performed a reassessment of the fair value of the common stock underlying the stock options granted on these dates, and for financial reporting purposes reassessed the fair value of these grants ranging from $0.61 to $0.88 per share and correspondingly recognized additional stock-based compensation expense during the six months ended June 30, 2014. The shares vest 25% on the one-year anniversary of the grant date and 1/48th of the shares vest each month thereafter for the remaining three years. In addition, on October 24, 2014, we granted Geoffrey S. Crouse, one of our directors, an option to purchase 15,000 shares vesting in equal monthly installments over one year, commencing on February 27, 2014. Such option has an exercise price of $1.45 per share, which our board of directors determined to constitute at least 100% of the current fair market value of our common stock on the date of grant.

In addition, we granted options to purchase shares of our common stock to non-executive officer employees and consultants on various dates after December 31, 2013 as follows: (1) 234,000 shares with a per share exercise price of $0.57 were granted on January 16, 2014; (2) 2,156,000 shares with a per share exercise price of $0.57 were granted on February 28, 2014; (3) 370,500 shares with a per share exercise price of $0.69 were granted on May 15, 2014; (4) 40,000 shares with a per share exercise price of $0.69 were granted on May 19, 2014; (5) 2,855,000 shares with a per share exercise price of $1.45 were granted on October 15, 2014; and (6) 170,000 shares with a per share exercise price of $1.45 were granted on October 24, 2014.

For valuations after the completion of this offering, our board of directors will determine the fair value of each share of underlying common stock based on the closing price of our common stock as reported on the date of grant.

The intrinsic value of all outstanding options as of June 30, 2014 was $               million based on the estimated fair value of our common stock of $              per share, the midpoint of the price range set forth on the cover page of this prospectus.

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Deferred tax assets

We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

As of December 31, 2013, our total gross deferred tax assets were $13.8 million. Due to our lack of earnings history and uncertainties surrounding our ability to generate future taxable income, the net deferred tax assets have been fully offset by a valuation allowance. The deferred tax assets were primarily comprised of federal and state tax net operating losses and tax credit carryforwards. Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to historical or future ownership percentage change rules provided by the Internal Revenue Code of 1986, and similar state provisions. The annual limitation may result in the expiration of certain net operating loss and tax credit carryforwards before their utilization.

Results of operations

Comparison of the six months ended June 30, 2013 and 2014

 
 
  Six months ended June 30,    
   
 
  Dollar
change

  %
change

(In thousands)
  2013
  2014
 

Revenue

  $ 6   $ 419   $ 413   *
         

Costs and operating expenses:

                     

Cost of revenue

    252     1,574     1,322   525%

Research and development

    6,165     10,043     3,878   63%

Selling and marketing

    934     3,437     2,503   268%

General and administrative

    2,290     4,900     2,610   114%
         

Total operating expenses

    9,641     19,954     10,313   107%
         

Loss from operations

    (9,635 )   (19,535 )   (9,900 ) 103%

Other income (expense), net

    2     (3 )   (5 ) *

Interest expense

    (30 )   (34 )   (4 ) 13%
         

Net loss

  $ (9,663 ) $ (19,572 ) $ (9,909 ) 103%
 

*      Not meaningful

Revenue

Revenue increased $0.4 million for the six months ended June 30, 2014 compared to the $6,000 recognized in the same period in 2013. Revenue for the six months ended June 30, 2013 resulted from an early access program we offered beginning in the first quarter of 2013. The increase is due to an increase in the adoption of our test, which resulted in an increase in cash collections during 2014.

Cost of revenue

Cost of revenue increased $1.3 million, or 525%, for the six months ended June 30, 2014 compared to the same period in 2013 primarily due to a $0.8 million increase in costs of reagents, laboratory materials and test validation costs and a $0.5 million increase in personnel costs related to the increase in headcount.

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The number of billed test results delivered increased from 73 for the six months ended June 30, 2013 to 702 in the same period in 2014.

Research and development

Research and development expenses increased $3.9 million, or 63%, for the six months ended June 30, 2014 compared to the same period in 2013. The increase was primarily driven by a $2.6 million increase in personnel costs related to the increase in headcount, a $1.0 million increase in allocated facilities-related expenses due to the expansion of our operations into two additional locations and a $0.1 million increase in costs of laboratory materials.

Selling and marketing

Selling and marketing expenses increased $2.5 million, or 268%, for the six months ended June 30, 2014 compared to the same period in 2013. The increase was due to a $1.3 million increase in personnel costs and travel related expenses due to the increase in headcount, a $0.4 million increase in consulting fees incurred in connection with various marketing and branding activities, a $0.2 million increase in conferences and trade show-related expenses and a $0.2 million increase related to an increase in allocated facilities related expenses as the result of our office expansion.

General and administrative

General and administrative expenses increased $2.6 million, or 114%, for the six months ended June 30, 2014 compared to the same period in 2013. The increase was due to a $1.1 million increase in legal costs incurred primarily related to the Myriad litigation matter, a $0.6 million increase in personnel costs resulting from an increase in headcount and a $0.5 million increase in professional services to support our increasing infrastructure as we expand our operations and prepare to become a public company.

Comparison of the year ended December 31, 2012 and 2013

   
 
  Year ended December 31,    
   
 
 
  Dollar
change

  %
change

 
(In thousands)
  2012
  2013
 
   

Revenue

  $   $ 148   $ 148     *  

Operating expenses:

                         

Cost of revenue

        667     667     *  

Research and development

    5,557     16,039     10,482     189%  

Selling and marketing

        2,431     2,431     *  

General and administrative

    3,004     5,764     2,760     92%  
             

Total operating expenses

    8,561     24,901     16,340     191%  
             

Loss from operations

    (8,561 )   (24,753 )   (16,192 )   189%  

Other income (expense), net

    2     (26 )   (28 )   *  

Interest expense

    (43 )   (59 )   (16 )   37%  
             

Net loss

  $ (8,602 ) $ (24,838 ) $ (16,236 )   189%  
   

*      Not meaningful

Revenue

Revenue was $0.1 million in 2013 compared to $0 in 2012 as we had an early access program started in the first quarter of 2013, and launched our first commercial offering in late November 2013.

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Cost of revenue

Cost of revenue was $0.7 million in 2013 compared to $0 in 2012. We incurred costs for 229 billable test results that we delivered during the year ended December 31, 2013. We did not begin commercial operations until the first quarter of 2013 when we had an early access program and the first commercial launch of our assay of 216 genes was in late November 2013.

Research and development

Research and development expenses increased $10.5 million, or 189%, in 2013 compared to 2012. The increase was primarily driven by a $5.1 million increase in personnel related costs due to the increase in headcount, a $3.0 million increase in laboratory materials, a $1.1 million increase in allocated facility related costs as a result of our expansion into two offices starting in March 2013, a $0.7 million increase in depreciation expense due to the increase in laboratory equipment, and a $0.3 million increase in outside consulting costs incurred for temporary lab engineering consultants hired to assist with an increase in our research activities. Further, we conduct extensive validation assays to confirm the analytical validity of our genetic testing platform and we sometimes conduct our own clinical studies to further demonstrate the utility of already known genetic tests in order to promote broader application and market adoption by the clinical community.

Selling and marketing

Selling and marketing expenses were $2.4 million for 2013 compared to $0 for 2012. We did not begin commercial operations until we launched our early access program in the first quarter of 2013. The increase was due to a $2.1 million increase in personnel costs and travel related expenses due to the increase in headcount, a $0.2 million increase in consulting fees incurred to assist with our marketing and branding activities related to the launch of our first test and a $0.1 million increase in allocated facilities related costs as the result of our expansion of operations into two locations in 2013.

General and administrative

General and administrative expenses increased $2.8 million, or 92%, in 2013 compared to 2012. The increase was related to a $1.3 million increase in legal and accounting professional services due to the growth in our operations, a $0.8 million increase in allocated facilities related costs as the result of our expansion of operations into two locations in 2013, and a $0.7 million increase in personnel-related expenses resulting from an increase in headcount.

Quarterly results of operations and other operating data

The following table sets forth our unaudited quarterly statements of operations data for each of the six most recent quarters in the period ended June 30, 2014. We have prepared the quarterly data on a basis consistent with the audited consolidated financial statements included elsewhere in this prospectus. In the opinion of management, the quarterly information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of this data. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this

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prospectus. The results of historical periods are not necessarily indicative of results of operations for a full year or for any future period.

   
 
  Three months ended  
(In thousands, except other operating data)
  Mar 31,
2013

  June 30,
2013

  Sept 30,
2013

  Dec 31,
2013

  Mar 31,
2014

  June 30,
2014

 
   

Revenue

  $   $ 6   $ 54   $ 88   $ 118   $ 301  

Costs and operating expenses:

                                     

Cost of revenue

    107     145     189     226     611     963  

Research and development

    2,589     3,576     4,456     5,418     4,965     5,078  

Selling and marketing

    396     538     665     832     1,666     1,771  

General and administrative

    1,131     1,159     1,747     1,727     1,895     3,005  
       

Total operating expenses

    4,223     5,418     7,057     8,203     9,137     10,817  
       

Loss from operations

    (4,223 )   (5,412 )   (7,003 )   (8,115 )   (9,019 )   (10,516 )

Other income (expense), net

    1     1     (27 )   (1 )   3     (6 )

Interest expense

    (14 )   (16 )   (14 )   (15 )   (17 )   (17 )
       

Net loss

  $ (4,236 ) $ (5,427 ) $ (7,044 ) $ (8,131 ) $ (9,033 ) $ (10,539 )
   

 

   
 
  Three months ended  
 
  Mar 31,
2013

  June 30,
2013

  Sept 30,
2013

  Dec 31,
2013

  Mar 31,
2014

  June 30,
2014

 
   

Other operating data:

                                     

Billable tests

    21     52     72     84     206     496  
   

Quarterly trends

Revenue increased quarter over quarter through June 30, 2014, reflecting our program of providing early access to our assay of 216 genes in the first quarter of 2013, followed by its commercial launch in late November 2013. The amounts we billed for our tests were approximately $0.8 million, $0.3 million, $0.1 million, $95,000, $70,000 and $28,000 for the three months ended June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, respectively.

Operating expenses generally increased consistently with the growth of the business. Cost of revenue increases were directly related to the increase in the volume of tests processed during each of the quarters through June 30, 2014. Our expenditures in research and development were lower in the quarter ended March 31, 2014 mainly because fewer tests were run in conjunction with leading academic institutions were received and processed during the first quarter of 2014. Our selling and marketing expenses increased significantly from the fourth quarter of 2013 to the first quarter of 2014 primary due to the increase in headcount in the sales team and the increase in travel and trade show expenses to promote our testing service to the market. During 2013, our general and administrative expenses remained relatively flat in the first, second and fourth quarters. The increase in general and administrative expenses in the third quarter of 2013 was mainly due to the fluctuations in professional fees paid for legal and accounting services. General and administrative expenses increased significantly in the second quarter of 2014 mainly due to the increase in professional services fees incurred to grow our business and infrastructure.

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Liquidity and capital resources

Liquidity and capital expenditures

Since inception, our operations have been financed primarily by net proceeds of $86.6 million from sales of our convertible preferred stock through June 30, 2014. In addition, we have entered into various capital lease agreements for an aggregate financing amount of $3.7 million from inception through June 30, 2014 to obtain laboratory equipment. The terms of the capital leases are typically three years with interest rates ranging from 3.5%–18.9%. The leases are secured by the underlying equipment. As of December 31, 2013 and June 30, 2014, we had $43.1 million and $22.0 million of cash and cash equivalents, respectively.

In August 2014, we issued 24,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate gross proceeds of $49.0 million. In October 2014, we issued an additional 35,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate gross proceeds of $71.0 million.

Our primary uses of cash are to fund our operations as we continue to grow our business. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We believe that our existing cash and cash equivalents as of June 30, 2014, along with the proceeds from the sale of Series F convertible preferred stock in August and October of 2014 and the estimated net proceeds from this offering, will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, management may in the future elect to finance operations by selling equity or debt securities. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. If additional funding is required, there can be no assurance that additional funds will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund our operating needs or sustain profitability. If we are unable to raise additional capital or generate sufficient cash from operations to adequately fund our operations, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability to execute on our business plan.

The following table summarizes our cash flows for the periods indicated:

   
 
  Year ended
December 31,
  Six months ended
June 30,
 
(In thousands)
  2012
  2013
  2013
  2014
 
   
 
   
   
  (Unaudited)
 

Cash used in operating activities

  $ (9,154 ) $ (23,030 ) $ (8,014 ) $ (18,663 )

Cash used in investing activities

    (826 )   (4,580 )   (1,058 )   (2,099 )

Cash provided by (used in) financing activities

    28,802     48,879     9,632     (269 )
   

Cash flows from operating activities

For the six months ended June 30, 2014, cash used in operating activities was $18.7 million. The net cash outflow from operations primarily resulted from our net loss of $19.6 million offset by non-cash charges of $1.0 million for depreciation and amortization, and $0.3 million for stock-based compensation. The change

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in net operating assets of $0.4 million was primarily due to an increase in prepaid expenses of $0.8 million related to prepaid equipment maintenance fees and software license fees and in other assets of $0.2 million related to the security deposit on our new office lease partially offset by a $0.6 million increase in payables to suppliers due to the growth in our business.

For the six months ended June 30, 2013, cash used in operating activities was $8.0 million. The net cash outflow from operations primarily resulted from our net loss of $9.7 million offset by $0.4 million for depreciation and amortization and non-cash charges of $0.1 million for stock-based compensation. The change in net operating assets of $1.2 million was primarily due to the $1.3 million increase in payables to the suppliers due to the growth in our business.

For the year ended December 31, 2013, cash used in operating activities of $23.0 million primarily resulted from our net loss of $24.8 million offset by $0.9 million for depreciation and amortization and non-cash charges of $0.3 million for stock-based compensation. The increase in net operating assets of $0.6 million was primarily due to the $1.0 million increase in payables to suppliers and partially offset by the increase in prepaid expenses of $0.4 million mainly related to the increase in tenant incentive receivables due from the landlord of our new office.

For the year ended December 31, 2012, cash used in operating activities of $9.2 million was primarily from our net loss of $8.6 million offset by $0.3 million for depreciation and amortization and non-cash charges of $0.1 million for stock-based compensation. The change in the net operating assets of $0.9 million was mainly due to the $0.9 million increase in other assets related to the security deposit for our new Palo Alto office.

Cash flows from investing activities

Cash used in investing activities of $2.1 million and $1.1 million for the six months ended June 30, 2014 and 2013 was primarily related to the purchase of property and equipment.

In 2013, we used $4.6 million in investing activities, the majority of which was related to purchase of property and equipment. In addition, amounts held as restricted cash increased by $60,000.

In 2012, we used $0.8 million in investing activities, the majority of which was related to purchase of property and equipment. In addition, amounts held as restricted cash increased by $60,000.

Cash flows from financing activities

Cash used in financing activities for the six months ended June 30, 2014 of $0.3 million was due to the payment of $0.4 million on our capital lease obligations offset by $0.1 million in proceeds from the issuance of our common stock upon exercise of stock options.

Cash provided by financing activities for the six months ended June 30, 2013 of $9.6 million was primarily from $9.9 million in proceeds from the issuance of convertible preferred stock, partially offset by payment of $0.3 million on our capital lease obligations.

In 2013, we generated $48.9 million from financing activities primarily resulting from $49.8 million in net proceeds from issuance of convertible preferred stock. These cash inflows were partially offset by payments of $1.0 million on our capital lease obligations.

In 2012, we generated $28.8 million from financing activities primarily resulting from $29.4 million in net proceeds from issuance of convertible preferred stock. These cash inflows were partially offset by payments of $0.6 million on our capital lease obligations.

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Contractual obligations and other commitments

The following table summarizes our contractual obligations as of December 31, 2013 (in thousands):

   
 
  Payments due by period  
Contractual obligations:
  Less than
1 year

  1 to 3
years

  3 to 5
years

  More than
5 years

  Total
 
   

Operating leases

  $ 1,568   $3,594   $1,690   $ 991   $7,843  

Capital leases

    906   1,167   29       2,102  
       

Total

  $ 2,474   $4,761   $1,719   $ 991   $9,945  
   

Off-balance sheet arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

Quantitative and qualitative disclosures about market risk

We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rates. We had capital lease obligation of $2.0 million and $1.6 million as of December 31, 2013 and June 30, 2014, respectively, which result from various capital lease agreements to obtain our lab equipment. We had cash and cash equivalents of $43.1 million and $22.0 million as of December 31, 2013 and June 30, 2014, respectively, which consist of bank deposits and money market funds. Such interest-bearing instruments carry a degree of risk; however, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.

We face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars (Chilean peso). Due to the uncertain timing of expected payments in foreign currencies, we do not utilize any forward exchange contracts. All foreign transactions settle on the applicable spot exchange basis at the time such payments are made. An adverse movement in foreign exchange rates could have a material effect on payments made to foreign suppliers and for license agreements. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our financial statements.

JOBS Act accounting election

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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Recent accounting pronouncements

On May 28, 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for us on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (ASU 2014-10). ASU 2014-10 simplifies the accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments related to the elimination of the inception-to-date information and other disclosure requirements of Topic 915 should be applied retrospectively, and are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. We early adopted this guidance as of January 1, 2012, and accordingly, there is no inception to date information presented in our consolidated financial statements.

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Business

Overview

Invitae's mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Our goal is to aggregate most of the world's genetic tests into a single service with higher quality, faster turnaround time and lower price than many single gene tests today. We were founded on four core principles:

Patients should own and control their own genetic information;
Healthcare professionals are fundamental in ordering and interpreting genetic information;
Genetic information is more valuable when shared; and
Driving down the price of genetic information will increase its clinical and personal utility.

As the price of DNA sequencing has declined, the amount of genetic information that can be generated per dollar has increased exponentially, enabling the generation, analysis and storage of more comprehensive genetic information than ever before. According to OMIM, there are more than 4,000 inherited genetic conditions for which the scientific and medical community has already identified specific genes and variants useful for diagnosis or treatment planning. By aggregating large numbers of currently available genetic tests into a single service, we can achieve great economies of scale that allow us to not only provide primary single gene or multi-gene tests but also to generate and store additional genetic information on behalf of the patient for future use. We refer to the service of managing genetic information over the course of disease or the lifetime of a patient as "genome management." In addition, as more individuals gain access to their genetic information, we believe that sharing genetic information will provide an economic opportunity for patients and us to participate in advancing the understanding and treatment of disease. We believe that our ongoing investment in building our infrastructure and attracting talent across a range of disciplines to generate, interpret and manage genetic information will position us to be a leader in the field of genetic testing and genome management.

In the near term, we plan to focus on the immediate market for symptomatic disease with the goal to aggregate testing for large numbers of genetic diseases into a single low-cost service. As our market share grows we expect that our business will develop in three stages over the longer term:

Genetic testing:  making genetic testing more affordable and more accessible with faster turnaround time than ever before. We believe that there is a significant market opportunity for high volume, low cost genetic testing that can allow us to serve a large number of clients.

Genome management:  building a secure and trusted genome management infrastructure. By generating and storing large amounts of individualized genetic information for every patient sample, we believe we can create value over the course of disease or lifetime of a client.

Genome network:  sharing genetic information on a global scale to advance science and medicine. We plan to help patients share their genetic information in a way that benefits them and us by acting as a permission-based broker on their behalf.

The fundamental challenge of the first stage of our business (genetic testing) is to deliver sufficiently comprehensive and quality content at a cost that makes sense for broad healthcare adoption and reimbursement. We believe we are well positioned to address this challenge over time given our investment in infrastructure that will allow us to perform these complex tests in high volume at low cost. This infrastructure includes the scientific curation of individual genetic disorders, genes and variants—a

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rapidly advancing area of science. It also includes large-scale laboratory processes and information systems to store, analyze and manage the data; a knowledge database that allows us to aggregate the role genetic variations play in diseases and drug responses; and software tools to help generate reports for physicians and their patients while reducing the time required by our genetic specialists for interpretation and report sign-out.

We are headquartered in San Francisco, California, where we have offices and a CLIA-certified facility. We also have offices in Palo Alto, California as well as a second laboratory in Santiago, Chile. We launched our first commercial offering in late November 2013 with an assay of 216 genes comprising 85 different genetic disorders and 17 targeted panels, and began selling and marketing our panels with a focused effort on hereditary cancers. We charge $1,500 per sample in most cases with the flexibility for our clients to order any subset of genes or multi-gene panels from our online ordering system for a given indication. Importantly, we are providing turnaround time of less than three weeks for the substantial majority of our tests. Our volume has grown rapidly since commercial launch with over 2,000 billable tests delivered as of September 30, 2014. We have a multi-disciplinary team of 144 people as of October 31, 2014, including bioinformaticians, clinical and medical geneticists, commercial and managed care experts, genetic counselors, scientists, software engineers, web developers, graphic designers and lab automation specialists, as well as administrative and corporate personnel. We believe that creating a strong team is a competitive advantage, and we strive to foster a motivating and unique culture in which our people can thrive.

We believe that the keys to our future growth will be to steadily increase the amount of genetic content we offer, consistently improve the client experience, drive physician and patient utilization of our website for ordering and delivery of results, increase the number of partners working with us to add value for our clients and consistently drive down the price per gene for genetic analysis and interpretation.

The global opportunity for genetic testing

We believe that genes are a fundamental particle of modern medicine and that genetic testing has the potential to affect billions of people. Every individual has a unique genome and we believe that comprehensive knowledge of this genetic makeup will be foundational to the future practice of medicine. We also believe that eventually many individuals in a modern healthcare system will have their genome sequenced at birth or during the course of their lives, resulting in the potential for dramatic improvements in health and wellness and an overall reduction in healthcare costs through preventive care.

Virtually everyone is carrying loss of function mutations in their genome, recessive genetic conditions that may affect their extended family or genetic mutations that may affect their response to various drugs or therapies. For example, approximately 2.0% of the population has a genetic variant in one of 52 genes identified by the American College of Medical Genetics as important incidental findings that should be reported to patients in part because they are medically actionable. In addition, approximately 0.4% of the population has a cardiac genetic condition that may lead to early onset cardiovascular disease, and approximately 0.5–5.0% of the population has a factor V Leiden variant that increases the genetic risk for blood clots.

The genetic testing market is a rapidly growing global market. According to UnitedHealth Group, the U.S. genetic testing and molecular diagnostics market in 2010 was estimated to be approximately $5 billion, of which approximately 60%, or $3 billion, was genetic testing. As of November 2014, genetests.org estimated that there were more than 39,000 different genetic tests available from over 650 laboratories. These tests can identify a person's predisposition to a particular disease (predictive testing), detect whether a person

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has a disease (diagnostic testing), predict the potential effectiveness of a therapy or drug (pharmacogenetic testing), or assess risk of disease progression (prognostic testing). Based on UnitedHealth's estimates for the growth of the genetic testing and molecular diagnostics market and our assumption that genetic testing's share of this market will be held constant at approximately 60% between 2010 and 2021, we expect the U.S. genetic testing market to grow to at least $9 billion by 2021.

An example of this rapid growth is in the area of hereditary genetic testing for cancer. The two most commonly tested genes for hereditary risk of breast and ovarian cancer, BRCA1 and BRCA2, were identified about two decades ago. Since their discovery, the market in the United States for testing those two genes alone has grown to over $600 million per year. In addition, the availability of low cost DNA sequencing has resulted in the discovery of multiple new genes that may cause hereditary forms of breast and ovarian cancer, resulting in a rapid shift in the marketplace toward multi-gene panels. We believe that the rapid growth of the genetic testing market for hereditary cancer and the rapid evolution of multi-gene panels is evidence of the potential for rapid market adoption of new genetic information.

While adoption of genetic testing has been increasing for certain medical applications, there remain a number of primary barriers limiting broader adoption. The cost of genetic testing has been prohibitively high for broad market adoption and use in routine medical practice. Under current pricing, payers generally restrict reimbursement of genetic testing to limited patient populations that meet specific criteria. In a survey by UnitedHealth, approximately 78% of physicians identified cost of tests and reimbursement as a barrier to incorporating genetic tests in their practice. We believe advances in DNA sequencing, information technology and capacity for analysis and high-throughput data processing will be key drivers for reducing the cost of genetic testing in the future.

Adoption of genetic testing also has been constrained by an inefficient testing process with long turnaround times. The growing availability of genetic tests that are specific to a single disease has created a serial retesting process—commonly referred to as a diagnostic odyssey—in cases where initial tests return negative results or where patients require testing for more than one condition. The retesting process is costly and time consuming, and it commonly fails to reach a conclusive clinical diagnosis. The challenges with sequential retesting are further exacerbated by long and unpredictable turnaround times. Currently, patients and providers can wait more than a month to receive each genetic testing result, which limits clinical applicability of genetic testing for patients who are in need of pressing follow-up treatment.

An example of this diagnostic odyssey is the genetic testing process for Bardet-Biedl syndrome, or BBS, a progressive multi-systemic disorder that begins to manifest in early childhood. Individuals with BBS can present with a variety of symptoms including obesity, degeneration of the retina, extra fingers or toes, kidney dysfunction and cognitive impairment. BBS is difficult and expensive to diagnose; patients have historically undergone testing for each individual gene. With over 15 genes implicated in the hereditary disease, sequential testing of individual genes, starting with the most common cause of the disease could easily take up to a year and cost over $10,000. With a multi-gene panel, we are now able to evaluate the majority of BBS genes in a single test for a price of $1,500, while providing reports to physicians usually within three weeks.

In addition, the market for genetic tests was constrained by the existence of patent protection for certain genetic testing. However, recent U.S. Supreme Court cases, including Mayo Collaborative Services v. Prometheus Laboratories, Inc. (2012), have clarified that naturally occurring DNA sequences are natural phenomena which should not be patentable. These recent cases have ushered in an era of broader participation in the market for genetic testing services.

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Finally, we believe the limited number of geneticists and genetic counselors has forced many physicians to navigate the complexities associated with diagnosis and treatment of genetic disease with insufficient expert assistance. In the same survey by UnitedHealth cited above, 49% of physicians identified a lack of familiarity with genetic tests as a barrier to greater adoption in their practice. We believe the growth of the number of genetic tests available has exacerbated this problem, and makes it more challenging for physicians to identify the appropriate tests and interpret their results. To help address these needs, our strategy is to make the process of ordering genetic tests and understanding the results easier, not only for patients and physicians, but for the broader universe of healthcare professionals.

Our solution for genetic testing

We are focused on making comprehensive genetic testing more affordable and more accessible than ever before, pursuing a large and rapidly growing market with a focus on price and quality. We aim to do so for the majority of genetic tests, consolidating most of them into a single offering at a price below the typical prices of many single gene or multi-gene panels.

Our products today

We launched our first commercial offering in late November 2013, an assay of 216 genes comprising 85 different genetic disorders and 17 targeted panels, and began selling and marketing our multi-gene panels with a focused effort on hereditary cancers, including breast, colon and pancreatic cancer. We charge $1,500 per sample in most cases with the flexibility for our clients to order any subset of genes or multi-gene panels from our online ordering system for a given indication. We also currently offer a free re-requisition of additional data within the same indication when ordered within 90 days of the date of service. Importantly, we are providing turnaround time of less than three weeks for the substantial majority of our tests. Since our initial launch, we have marketed additional panels addressing other genetic conditions based on the same assay of 216 genes.

We have developed a value proposition called "the Invitae Advantage," which articulates part of our competitive advantage as follows:

More affordable than ever before.  One price. Any test.
Faster time to answers.  From sample to results in three weeks on average.
Flexible test options.  Design your own test or select a curated panel.
Deeper genetic insights.  Choose multi-gene panels or order a free re-requisition.
Confidence and quality.  Our team of genetic experts delivers high-quality test results.

Since our commercial launch, approximately 80% of our orders have been for indications associated with hereditary cancer. Our hereditary cancer panel options include BRCA1 and BRCA2, a high-risk hereditary breast cancer panel of seven genes, a hereditary colon cancer panel of 14 genes, a hereditary pancreatic cancer panel of 17 genes, or a more comprehensive hereditary cancer panel of 29 cancer genes. Each of the cancer genes or panels is typically available for $1,500 regardless of whether one or 29 genes are ordered. We are growing our volume rapidly and, since our commercial launch, we have delivered more than 2,000 billable tests as of September 30, 2014. Sales of our tests have grown significantly in 2014 from over 200 tests in the first quarter of 2014 to over 1,000 tests in the third quarter of 2014, which we believe is evidence that our value proposition is attractive to our clients. We estimate that the U.S. market for hereditary cancer tests is greater than $650 million per year and thus represents a key growth opportunity for us. More broadly, it is estimated that approximately 5-10% of all cancers are likely to have a hereditary basis. Today only a subset of individuals are eligible for BRCA1 and BRCA2 testing covered by third-party health insurance plans. However, clinical studies have established that a significant percentage

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of individuals with breast cancer who would not have qualified for testing based on prior family history may test positive for BRCA1 and BRCA2 mutations. We believe that the market for hereditary breast and ovarian cancer could continue to expand as lower-cost testing becomes available, allowing healthcare systems to test larger populations more cost-effectively.

We plan to substantially increase our sales and marketing effort in oncology in 2014 and 2015 as well as expand our sales efforts beyond cancer. Since our initial commercialization, we have marketed additional panels involved in multiple different genetic disorders, including cardiology, hematology, neurology and pediatric panels. For example in the field of neurology, we have recently started to market Charcot-Marie Tooth and Spastic Paraplegia panels. Charcot-Marie Tooth, or CMT, is one of the most common inherited neurological genetic disorders in the United States and affects approximately 1 in 2,500 individuals. We include 29 genes in our CMT panel, providing what we believe is one of the most comprehensive offerings for CMT at one of the lowest prices and one of the fastest turn-around times on the market.

In cardiology we have recently begun to offer panels for hypertrophic cardiomyopathy, long QT syndrome, short QT syndrome and Brugada syndrome. Long QT syndrome affects approximately 1 in 2,500 individuals, resulting in significant risk of developing an irregular heartbeat and potential for sudden cardiac death. In addition, the presence of long QT syndrome can result in significant side effects to some commonly prescribed drugs. Hypertrophic cardiomyopathy, or HCM, is the leading cause of sudden cardiac death in people under 30 years old and is believed to be prevalent in about 0.2% of the population. HCM may not present with symptoms until it results in sudden cardiac death. Thus, lower cost of testing for multiple genes which cause HCM could be useful for screening otherwise healthy individuals and their families for a potentially lethal condition.

We also offer panels for pediatric conditions such as Noonan spectrum disorders and ciliopathies. Noonan syndrome is found in approximately 1 in 2,000 individuals and results in numerous congenital problems including congenital heart defects, short stature, learning problems and impaired blood clotting. Ciliopathies are a broad class of genetic diseases that include diseases such as BBS, Joubert syndrome, polycystic kidney disease and others that involve a large number of genes and have been historically hard to diagnose in a cost effective and timely manner.

The foregoing are just some of the inherited genetic conditions included in our current assay of 216 genes. The table below lists disorders that are covered by our 216 gene assay. Some genes are involved in more than one disorder and many disorders may be associated with multiple genes. For a number of disorders in our current panel, we may provide some but not all of the genes that we believe are necessary to provide a comprehensive genetic test. Nonetheless, the low price of our assay allows physicians to conduct an initial screen for the genes which we do cover at prices that we believe are attractive for screening purposes. For example, while we do not cover all BBS genes, we do cover the majority of the genes and at a price we believe is highly attractive for such a test. When we believe that our gene coverage for a given disorder is broad enough to be considered comprehensive by generally accepted medical practice, we classify it as a panel. Within each gene, disorder and panel there may also be certain technical limitations of our assay for specific mutations or types of mutations that we appropriately identify for ordering physicians and note in our clinical reports.

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Clients can order based on gene, disorder or panel (in bold):

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Our genetic testing process

We have designed our service to be simple for our clients to use. Our clients send a sample to us and in turn receive a test report. Behind this streamlined user experience, however, is a sophisticated, highly automated infrastructure that we have developed in order to scale in a cost effective manner.

Starting from the client requisition and patient sample, through the report delivery, we have invested heavily in tools and technologies at each step in the process:

Client portal, logistics and sample management:

We have built an online, easy to use catalog and web portal to enable convenient online test ordering by healthcare providers. This web portal can be entered directly or through one of our other client tools, for example the digital Invitae Family History Tool available online and as an iPad application. Clients can use our web portal to place orders, track progress of the client sample through our system, contact client support, download reports and order further tests. In addition, we are dedicated to providing the highest level of client service, enhanced by technology wherever possible. We plan to continue to invest in online tools that can help support our clients' workflow and create a world class client experience.

Sample processing and sequencing:

We have developed a highly automated laboratory process for receiving and tracking samples, extracting genomic DNA, isolating targeted DNA sequences from each genome and sequencing the targeted genes using state-of-the-art next generation DNA sequencing technology. In addition, our fully integrated information and automation systems enable us to track every step from receiving and processing a sample to delivery of a clinical report. The data generated by our integrated sample processing infrastructure allow us to reduce the labor required, increase the amount of data used in our quality systems and reduce the raw costs of sequencing. We plan to continue to invest in this infrastructure to enable further scaling in volume and in breadth of the content we offer.

Bioinformatics pipeline:

We integrate standard and proprietary bioinformatics analyses in our workflow. This, combined with our integrated sample processing infrastructure, allows us to optimize our processes for variant detection with clinical sensitivity and specificity, especially for variant types that are difficult to resolve with current technologies. For example, we are able to offer certain types of complex variant analysis without having to run additional laboratory tests. Any pathogenic variants detected by our next generation DNA sequencing and analysis process are currently confirmed in a second laboratory test before reporting to a physician.

Clinical reporting:

We have invested significantly in scientific curation, bioinformatics, software infrastructure and tools to build a knowledge base about genetic conditions, genes and variants. This knowledge base and the software toolkit that delivers the information to our clinical team enables them to view relevant information in a dashboard, which allows us to provide high quality genetic interpretation of test results to physicians and their patients. Each report is typically reviewed by a Ph.D. scientist, a genetic counselor and a licensed medical professional. Variants are classified in accordance with American College of Medical Genetics guidelines as benign, likely benign, variants of uncertain significance, likely pathogenic or pathogenic. We believe our investment in improved tools for genetic interpretation of test results also allows us to greatly increase the reporting throughput while at the same time standardize

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    the variant identification and reporting process. By heavily investing in scalable software tools to execute the sample-to-report process, we believe that our clinical analysis costs will decline as our experience grows, even while assay and panel sizes increase.

Analyzing genomes requires a major investment in software and data analysis:

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One of our competitive advantages is the way in which we generate and deliver clinical reports to our clients. While our approach is enabled by recent advances in next generation sequencing technology, delivery of an individual, industry standard, clinical report that matches the clinical sensitivity and specificity of the various tests being ordered requires us to address a number of challenges. In order to do so, we have invested in solving four key areas of complexity:

Genetic complexity:  Multiple genes and pathways can be implicated in genetic disorders, and overlapping networks of genes and symptoms can make genetic diagnosis ever more complicated for physicians to assess. Given the intensity of scientific and clinical research in the role of genes in disease process, the available information associating genes with clinically relevant outcomes is rapidly evolving.

To address this complexity, we expect to continue to release new genetic content and provide healthcare professionals with the flexibility to customize their orders by genes, disorders or multi-gene panels.

Disparate, non-standardized clinical information:  Many of the clinicians and researchers in the field of genetics use information taken from clinical research literature and multiple public databases in disparate repositories hosted around the world. However, many of the public databases are subject to errors and inconsistencies, subjective outcome determinations, unclear condition boundaries and genes and variants with multiple aliases. In addition, the physical mapping to the genome or to the appropriate transcript is in some cases incorrect.

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    With the goal of ensuring the quality of information we are using to annotate variants identified by our assay, we employ geneticists to evaluate available literature and correct errors before incorporating the information in our knowledge base. We also contribute to public understanding by publishing anonymized variant information from our tests in Clinvitae, a database of clinically-observed genetic variants aggregated from public sources that we operate and make freely available, and Clinvar, a similar database operated by the National Center for Biotechnology Information.

Limitations of next generation sequencing to determine complex variants:  While recent advances in sequencing technologies have been impressive, use of these technologies to consolidate testing for many genetic disorders requires additional work when clinically important variants are complex and less amenable to standard sequencing technologies. Current next generation sequencing technologies typically divide DNA into relatively short strands, or "reads," for sequencing in a highly parallel manner. The process then uses software to assemble these short reads back into sequences that represent one or more genes. This process works very well when the variant involves a change in one or more single bases, or points, in the gene's structure. It works less well when the variant involves a more complex variation, such as a large insertion, deletion or duplication.

One way to address this challenge is to use a different technology to identify these variants. While we take this approach on occasion, it increases test costs and turnaround time, as it requires the management of multiple processes, often sequentially. As a consequence, we have invested in integrated sample preparation and software analysis processes that allow us to identify certain of these variant types using our next generation sequencing platform without having to resort to alternative technologies. This allows us to deliver high quality reports that identify many of these complex variants at reasonable cost and turnaround times.

Clinical interpretation at scale:  As sequencing costs decline and the amount of available raw DNA sequence data and genes analyzed per individual sample grows, we expect the cost to interpret the data to increase. Unless addressed systematically, analysis and interpretation of the sheer volume of DNA sequence information available for each patient will require increasing amounts of medical professionals' time.

We have invested significantly in scientific curation, bioinformatics and software infrastructure and tools to build a knowledge base about genetic conditions, genes and variants. This knowledge base and the software toolkit that delivers the information to our clinical team enables them to view relevant information in a dashboard, which allows us to provide high quality genetic interpretation of test results to physicians and their patients. We can thus significantly increase the reporting throughput while at the same time standardizing the variant identification and reporting process, which allows us to deliver a simple, easy to interpret, clinical report to the ordering physician.

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We have developed a standardized clinical report for clients' ease of use:

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To build the infrastructure that enables us to pursue consolidation of the rapidly growing global market for genetic testing will require significant research and development resources. Our research and development expenses were $5.6 million, $16.0 million and $10.0 million in 2012, 2013 and the six months ended June 30, 2014, respectively.

Commercializing our genetic tests

We have developed an offering that enables healthcare professionals to customize a test, receive rapid test results and pay a single price at requisition. Currently, we also offer a free re-requisition for the same indication within 90 days of the date of service. We believe that this offering, the associated value propositions and our commercial approach will allow us to accelerate market adoption of our genetic tests.

Currently, we primarily target genetic counselors and geneticists, who we believe are early adopters and can influence broader clinical acceptance of new diagnostics, including multi-gene panels. We intend to expand our reach to include oncologists, neurologists, cardiologists and other healthcare professionals as we expand our offering and our commercial organization.

In order to reach current and future potential clients, our strategy is designed to expand our brand awareness, increase the availability of genetic content, increase traffic to our website, deliver an excellent user experience and attract partners. By offering a compelling value proposition and a comprehensive menu of genetic content at competitive prices, we seek to increase the number of clients that order a test, to encourage repeat orders and to extend client retention.

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We employ a variety of commercial strategies to achieve these goals:

Our model incorporates a smaller sales force than is typical for other diagnostic companies.  Because we are aggregating large numbers of genetic tests into a single service, our offering will in most cases replace an existing test already offered by a third party. Where our test is replacing an existing test already offered by a third party, clinical utility of the tests that our service might replace is generally well established and accepted in medical practice, thus requiring a targeted sales force that manages relationships with our clients with the support of our in-house client services team.

We are building a sophisticated client services team.  We strive to deliver an enhanced customer experience and have hired a team with deep clinical and scientific expertise designed to ensure our clients receive quality information. To supplement our client services team, we provide our clients access to our lab directors and genetic counselors for support as needed. We believe that this approach will allow us to maintain existing client relationships, allowing our sales force to focus on generating new accounts and extending the reach within existing accounts.

Payors may emerge as a sales channel.  Given our commitment to making genetic information as affordable and accessible as possible, we see price as a competitive advantage that we expect will be particularly appealing to payors seeking to control healthcare costs. We believe that—with equal or better turnaround time and quality—payors will be supportive of our products and encourage their coverage universe to utilize them. We have recently begun to implement a reimbursement strategy and plan to focus on establishing broad coverage for the long term.

We use innovative sales solutions.  We have built an advanced web portal for healthcare professionals and their patients to enhance and streamline their user experience, which we believe will encourage them to become loyal clients of Invitae. We are also committed to utilizing innovative technology to complement our sales and marketing effort and reduce the overall cost of client acquisition. For example, our Invitae Family History Tool is a family history collection tool available in the Apple app store, which enables genetic counselors to digitally build, modify, share and save their patients' family histories. This tool also helps drive awareness of Invitae and helps to facilitate online ordering. We plan to continue to build innovative sales solutions capitalizing on the expertise of our extensive team of software developers.

We employ an integrated marketing approach.  Our marketing strategy is focused on driving adoption and educating healthcare professionals on the value of multi-gene panel testing for hereditary cancers, cardiac conditions and other genetic diseases. We work closely with national and regional patient advocacy groups and medical professional societies to promote the awareness and benefits of genetic testing. Our marketing activities include presenting at medical conferences and scientific meetings, advertising on leading websites and other media, contributing to social media, conducting public relations campaigns, developing business alliances and partnerships and sponsoring continuing medical education.

Internationally, we are securing distribution arrangements in select territories to drive awareness and adoption. We currently have distribution agreements in Brazil, Israel, Mexico and other geographies and will work with our partners to develop our go-to market strategy and to create brand awareness, lead generation and client engagement activities in those markets. We intend to continue to build this network to increase our global presence and to make affordable genetic testing available to patients around the world.

Increased sales and marketing efforts may be required to compete with competitors who are more established in the market and have larger direct sales forces than we do. To this end, we plan to further

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staff in this area to expand our reach into new markets, develop educational information for patients, and engage with our target audience.

The goal of our integrated, global sales and marketing approach is to develop and build multiple channels that drive adoption and growth, enabling us to bring low cost genetic testing into routine medical practice to improve the quality of healthcare for billions of people.

Securing reimbursement

By focusing on affordability, comprehensive genetic content, flexible ordering and quality, we designed our service offering to provide benefits to payors. Because we are aggregating large numbers of genetic tests into a single service, our near-term offering will in most cases replace an existing test already offered by a third party. Where our test is replacing an existing test already offered by a third party, the clinical utility of the tests that our service might replace is generally well established and accepted in medical practice.

We receive payment for our services from three categories of payors: patients, institutions and third-party payors. Given the relatively low cost of our test, a small but consistent percentage of patients whose physicians order our tests elect to pay for the tests themselves. Institutions, which are typically hospitals or foreign healthcare providers, account for a meaningful percentage of our test orders. We bill these organizations for our services, and they are responsible for paying those bills and seeking reimbursement where applicable. In the case of third party distributors, we may discount our price in exchange for marketing and sales services provided by the distributor in the geographic market where it operates.

Third-party payors are responsible for paying for the largest percentage of tests we deliver. Currently, these third-party payors consist exclusively of private health insurers. We believe that establishing coverage from the Centers for Medicare and Medicaid Services, or CMS, is an important factor in gaining adoption by healthcare providers, and we have applied for enrollment as a Medicare provider.

Third-party payors, including private insurers and CMS, require us to identify the test for which we are seeking reimbursement using a Current Procedural Terminology, or CPT, code set maintained by the American Medical Association, or AMA. Where we offer a multi-gene panel that includes a gene for which the AMA has an established CPT code, we identify the test provided under that CPT code when billing a third party payor for that test. In cases where there is not a specific CPT code, our test may be billed under a miscellaneous code for an unlisted molecular pathology procedure. Because this miscellaneous code does not describe a specific service, the insurance claim must be examined to determine what service was provided, whether the service was appropriate and medically necessary, and whether payment should be rendered. This may require a letter of medical necessity from the ordering physician and it may result in a delay in processing the claim, a lower reimbursement amount or denial of the claim. Given the changing CPT coding environment, our practices regarding billing may change over time.

From inception through September 30, 2014, approximately 26% of billable tests have been paid.

Additionally, we are targeting Innovation Centers within select payor organizations to establish pilot programs in order to demonstrate the utility of multi-gene panels. One such program is underway with a major U.S. healthcare provider. We also have an agreement with MultiPlan, a large PPO Network, which provides for adjudication and payment of claims for tests we deliver to members of their network in cases where we have not yet contracted with the payors in whose plans the test patients are members.

Supporting clinical data

We do not typically develop new biomarkers but rather aggregate already known genetic tests into our genetic testing platform. However, generating supporting clinical data is a priority for us as we seek to expand the gene content and adoption of our panels and provide supporting information to healthcare

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professionals. We conduct clinical studies to confirm the analytical validity and, when appropriate, clinical utility of our genetic testing platform. These data are used in marketing materials, whitepapers, scientific presentations and publications as appropriate.

Some panels we offer interrogate known genes that may be used in a novel clinical context, for example, the testing of genes that are known to cause certain cancers but have not been reported in other types of cancer. In these cases additional clinical utility data may influence both adoption and reimbursement. We thus also participate in studies to examine issues such as prevalence of genetic findings in different clinical populations and clinical actionability of these findings. We have developed research collaborations with key opinion leaders and leading academic medical centers with patient-care expertise and the appropriate patient populations for clinical studies.

In April 2014, a team of researchers from Stanford University and Invitae published the initial results of such a collaboration in the Journal of Clinical Oncology. The study utilized a panel of 42 cancer risk genes selected for clinical and research relevance that were tested by us on bio-banked germline DNA from 198 women who had been referred for hereditary breast and ovarian cancer testing to the Stanford University Medical Center. These individuals had been previously tested for BRCA1 and BRCA2 by an independent laboratory. Of the patients who participated in this study, 174 had breast cancer and 57 carried pathogenic germline variants in BRCA1 and BRCA2. The study found that BRCA1 and BRCA2 results from our panel were highly concordant with prior BRCA testing results on these individuals. Among the 141 BRCA-negative women, our panel identified additional risk variants in the MLH1, CDH1, NBN, ATM, MUTYH, CDKN2A, SLX4, BLM and PRSS1 genes. Based on the identification of new risk variants in genes beyond BRCA1 and BRCA2, Stanford's clinical staff determined that about 10% of participants warranted re-contact and additional counseling based on this new information. Stanford provided personalized recommendations for additional screening and other potential changes in care were provided as appropriate. The Stanford team found that this counseling was both feasible and was appreciated by the patients.

One of the patients described above is a woman who had been diagnosed with unilateral breast cancer in her mid-30s. At the time of her original diagnosis, the patient received a negative BRCA1 and BRCA2 test report from an independent laboratory, and consented to have her DNA banked. In this study, the patient was found to have a pathogenic variation in the gene MLH1 associated with Lynch syndrome. Following Institutional Review Board-approved protocol, the patient was re-contacted and the MLH1 results independently confirmed and communicated to her. In the time between the BRCA1 and BRCA2 and gene panel tests, the patient had been diagnosed with endometrial cancer. Following communication of her MLH1 status, she underwent an early colonoscopy and a polyp was found and removed. Thus, the tubular adenoma was caught years earlier than if no broad genetic test had been performed.

More recently, our scientists collaborated with two medical centers to test 600 patients indicated for BRCA1 and BRCA2 testing under National Comprehensive Cancer Network guidelines. Each of these patients had also previously received BRCA1 and BRCA2 test results from another, well-established laboratory employing traditional diagnostic techniques. Our test detected all BRCA1 and BRCA2 mutations that had been previously detected and independently confirmed. This list includes sequence variants of varying sizes and complexities, as well as deletions and duplications. All pathogenic variants detected by our assay were confirmed in the reference data. We observed 99.8% agreement between our clinical interpretations of pathogenic variants and those reported by the other lab. Exactly one discrepancy was present, a BRCA variant described in the literature as pathogenic, citing a report from the other laboratory, but without specific evidence of pathogenicity from that laboratory. For the subset of patients in the study who had full sequence data for both BRCA1 and BRCA2 from both Invitae and from the reference lab, we reported a variant of uncertain significance, or VUS, in 6% of the patients, while 4% of the patients had a VUS from the other lab. For this count, we excluded patients who received limited testing (e.g., an Ashkenazi

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mutation panel or single-site testing) as such tests can never produce a VUS and artificially reduce VUS rates. We believe that sharing data on clinically-interpreted genetic variants benefits the medical and scientific communities by making knowledge more accessible, reducing VUS rates, and enabling independent verification of genetic test results. We are committed to sharing our clinically-interpreted variants along with the supporting evidence. This study has been expanded to over 900 patients and we expect the full study results to be available in 2015.

Clinical data from our various research and development efforts have been accepted for presentation at major conferences, including those sponsored by the Association for Molecular Pathology, the American College of Medical Genetics and Genomics, the American Society of Clinical Oncology, the American Society of Human Genetics, and the National Society of Genetic Counselors. Additional data have been submitted for publication and new studies in complementary clinical areas are in process.

Expanding genetic testing content

Aggregating multiple genetic tests into one service provides economies of scale and greater laboratory efficiency. We are focused on delivering a wide variety of genetic content through our CLIA-certified laboratory, and plan to release an increasing menu of content over time. By providing large numbers of different but related tests, such as multiple genes associated with a broad genetic condition like hereditary cancer or cardiovascular disorders, we provide physicians with choice and flexibility in ordering tests for individual genes, panels of genes or custom sets of genes at the physician's discretion.

We expect to expand the amount of genetic information we provide over time to include all of the clinically-indicated genes currently known—more than 4,000 according to genetests.org—and eventually the whole genome. The long list of disorders for which clinicians currently order these tests highlights the opportunity at hand in aggregating the "long tail" of genetic tests.

We plan to steadily increase the release of genetic content while driving down the cost per gene:

GRAPHIC

We are developing an integrated portfolio of laboratory processes, software tools and informatics capabilities that allow us to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for physicians and their patients. In addition, we are optimizing web technologies for efficient and productive interactions with physicians and patients using our service. We are investing heavily in systems that we believe will allow us to deliver individual clinical reports for physicians and patients from an expanding menu of content at increasing speed while decreasing costs per gene over time.

The evolution of our business

There is an opportunity for genetic tests and information to be aggregated and then ultimately captured in comprehensive genome management services. We believe this shift will enable the medical community to use genetic information on an ongoing basis, as part of mainstream medical practice, to improve patient care.

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Genome management

We are building a genome data management infrastructure to provide clients, including patients and healthcare professionals, with an ongoing resource for pertinent genetic information over the course of disease or life of a patient. In the future we plan to work with healthcare providers to establish a system where this genetic information is linked at the point of care for appropriate use as needs arise.

The decreasing cost of DNA sequencing is allowing us to provide an increasing amount of genetic information at a decreasing price per gene and thus aggregate an expanding number of genes into a single service. As a result, our assay captures more genetic information than the physician may initially request. Only those genes that are requisitioned by the ordering physician are analyzed by our medical team and reported to the ordering physician and patient. The additional information is stored electronically on behalf of the patient should their physician request any of it in the future. Currently, we allow re-requisition of data for additional genes within the same indication at no additional charge within 90 days of the date of service.

As the amount of information available for each patient expands, we plan to initiate a genome management program to provide patients and their healthcare providers with access to that additional information to answer healthcare questions as they arise. We expect to make additional genetic content accessible to physicians and their patients along with educational materials on the conditions, genes and variants. Because the raw DNA sequence information has already been derived from our laboratory processes, the cost of delivering an additional clinical report will involve only information management and clinical interpretation, and as a consequence will be significantly lower than running a new test.

Ultimately, we believe we can significantly improve patient care by offering comprehensive genetic testing, where reports for large numbers of genetic conditions can be available for additional charges over the lifetime of a patient. For example, a patient whose whole genome has been sequenced could have that information linked to an electronic medical records system or available via Invitae systems for a variety of applications. Using this information, we may be able to provide a surgical team with genetic information about a patient's predisposition to complications associated with anesthesia, post-operative medication and bleeding or clotting. As another example, in the case of patients undergoing chemotherapy we may be able to provide the treating clinicians with information about other genetic conditions that might result in complications during treatment.

The genome network

As our genetic testing and genome management offerings grow in scale, we intend to continue to invest in informatics solutions that enable sharing of genetic information to improve healthcare and clinical outcomes. Participants in our genome network may include patients, family members, healthcare professionals, payors, industry professionals, researchers and clinical trial sponsors.

For example, patients will be able to share information regarding their health and test results with family members and future generations to help them understand their own health, enabling targeted testing and potentially reducing common health issues. Parents of children with the same rare genetic conditions can come into contact with each other to compare treatment options, educational choices, and provide emotional support. Physicians could access easily navigated databases that show the latest scientific data, including variants, and connect with other physicians to discuss diagnoses and treatment options for similar patients. Pharmaceutical companies may seek to identify individuals with a particular genetic profile and medical history to participate in clinical trials of new treatments.

The first application of our network strategy is our Invitae Family History Tool, which is available as a free web or iPad application. This application enables users to build, modify, share and save relevant family genetic and health history information. All data is stored in a HIPAA-compliant cloud computing

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environment. A second part of our network strategy is Clinvitae, a web property that allows physicians or patients to look up individual genes and variants in order to find out additional genetic information. In the future, we plan to add functionality to allow patients and physicians to share more information about their variants and connect with other patients or physicians who might be able to contribute additional information that could affect their health and wellness.

We do not believe that the genome network will contribute to our financial results for several years. The success of any network offering will depend on our ability to achieve scale in our genetic testing and genome management services. The success of the genome network will also require that we deliver infrastructure to enable the market for the permission-based sharing of genomic data in a way that is consistent with our core principles regarding patients' ownership and control of their data.

Our strategy

Our strategy for long-term growth is focused on five key drivers of our business, which we believe cumulate to create a flywheel effect:

GRAPHIC

Expand our genetic testing content.  We intend to continue to expand our test menus by steadily releasing additional genetic content, ultimately leading to affordable whole genome services. The breadth and flexibility of our offering is intended to contribute to an improved user experience.

Create a unique user experience.  A state-of-the-art interactive platform will enhance our service offering, leverage the uniquely empowering characteristics of online sharing of genetic information and, we believe, enable a superior economic offering to clients. We intend to continue to expend substantial efforts developing, acquiring and implementing technology-driven enhancements to our web properties and transaction-processing systems. We believe that an enhanced user experience and the resulting benefits to our brand and reputation will help draw clients to us.

Drive traffic.  We intend to increase our brand equity and visibility through excellent service and a variety of marketing and promotional techniques, including scientific publication and presentation, sales, marketing, public relations, social media and web technology vehicles. We expect that increased traffic to our website and eventual increases in tests orders will help us to attract partners.

Attract partners.  As we release additional genetic content and attract more clients, we believe our business becomes particularly attractive to potential partners that can help the patients in our network further benefit from their genetic information or that provide us access to new clients who may wish to

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    join our network. The cumulative effect of the increased volume brought by all of these strategic components will allow us to lower the cost of our service.

Lower the cost and price of genetic information.  Our goal is to provide clients with a broad menu of genetic content at a reasonable price and rapid turn-around time in order to grow volume and further achieve economies of scale. As we do so and experience further cost savings, we expect that those cost savings will allow us to deliver still more comprehensive information at decreasing prices per gene, allowing us to experience cumulative benefits from the strategies outlined above.

We seek to differentiate our service in the market by establishing an exceptional client experience. To that end, we believe that elevating the needs of the client over those of our other stakeholders is essential to our success. Thus, in our decision-making processes, we will strive to prioritize, in order: (1) the needs of our clients; (2) motivating our employees to serve our clients; and (3) our long-term stockholder value. We believe that focusing on clients as our top priority rather than short-term financial goals is the best way to build and operate an organization for maximum long-term value creation.

Competition

Our competitors include companies that offer molecular genetic testing services, including specialty and reference laboratories that offer traditional single and multi-gene tests. Principal competitors include companies such as Myriad Genetics, Ambry Genetics, GeneDx, a subsidiary of Bio-Reference Laboratories, Laboratory Corporation of America and Quest Diagnostics, as well as other commercial and academic labs. In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness.

We believe the principal competitive factors in our market are:

price and quality of tests;
turnaround time of testing results;
coverage and reimbursement arrangements with third-party payors;
breadth and depth of content;
convenience of testing;
brand recognition of test provider;
additional value-added services and informatics tools;
accessibility of results;
client service;
quality of website content; and
reliability.

We believe that we compare favorably with our competitors on the basis of these factors. However, many of our competitors and potential competitors have longer operating histories, larger customer bases, greater brand recognition and market penetration, substantially greater financial, technological and research and development resources and selling and marketing capabilities, more experience dealing with third-party payors. As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their tests than we do, or sell their tests at prices designed to win significant levels of market share. We may not be able to compete effectively against these organizations.

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Regulation

Reimbursement

In September 2014, the American Medical Association published new CPT codes for genomic sequencing procedures that will be effective for dates of service on or after January 1, 2015. These include genomic sequencing procedure codes for panels, including hereditary colon cancer syndromes, targeted genomic sequence analysis panels for solid organ neoplasms, targeted genomic sequence analysis panels for hematolymphoid neoplasm or disorders, whole exome analyses, and whole genome analyses. In a preliminary determination under the Medicare Clinical Laboratory Fee Schedule, or CLFS, published in October 2014, CMS proposed to set the payment rate for these codes by the gap-fill process. Under the gap-fill process, local Medicare Administrative Contractors, or MACs, would establish rates in 2015 considering laboratory charges and discounts to charges, resources, amounts paid by other payers for the tests, and amounts paid by the MAC for similar tests. Based upon the local gap-filled rates established in 2015, a national limitation amount for Medicare will be established for 2016. The national limitation amount serves as a cap on the Medicare and Medicaid payment rates for a test procedure. A final determination as to whether the rates for the genomic sequencing procedures will or will not be set by gap-fill in 2015 is expected to be announced by CMS by December 2014. If we are required to report our tests under these codes, there can be no guarantees that Medicare (or its contractors) will set adequate reimbursement rates for these new codes.

In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, or PAMA, which included substantial changes to the way in which clinical laboratory services will be paid under Medicare. Under PAMA, laboratories that receive the majority of their Medicare revenue from payments made under the CLFS or the Physician Fee Schedule would report, beginning in 2016, and then every three years thereafter (or annually for "advanced diagnostic laboratory tests"), private payor payment rates and volumes for their tests. An advanced diagnostic laboratory test is a clinical diagnostic laboratory test covered under Medicare that is offered and furnished only by a single laboratory and not sold for use by a laboratory other than the original developing laboratory (or a successor owner) and meets one of the following criteria: (1) the test is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result; (2) the test is cleared or approved by the Food and Drug Administration; or (3) the test meets other similar criteria established by the Secretary of Health and Human Services (no criteria have been established by the Secretary as of October 2014). We do not believe that our tests meet the current definition of advanced diagnostic laboratory tests, and therefore believe we will be required to report private payer rates for our tests on an every three years basis. CMS will use the rates and volumes reported by laboratories to develop Medicare payment rates for the tests equal to the volume-weighted median of the private payor payment rates for the tests. Laboratories that fail to report the required payment information may be subject to substantial civil money penalties.

For tests furnished on or after January 1, 2017, Medicare payments for clinical diagnostic laboratory tests will be paid based upon these reported private payor rates. For clinical diagnostic laboratory tests that are assigned a new or substantially revised code, initial payment rates for clinical diagnostic laboratory tests that are not advanced diagnostic laboratory tests will be assigned by the cross-walk or gap-fill methodology, as under prior law. Initial payment rates for new advanced diagnostic laboratory tests will be based on the actual list charge for the laboratory test.

The payment rates calculated under PAMA will be effective starting January 1, 2017. Any reductions to payment rates resulting from the new methodology are limited to 10% per test per year in each of the years 2017 through 2019 and to 15% per test per year in each of 2020 through 2022.

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PAMA codified Medicare coverage rules for laboratory tests by requiring any local coverage determination to be made following the local coverage determination process. In a proposed rule posted in July 2014, CMS proposed specific timelines and processes for developing and finalizing laboratory local coverage determinations. A final rule is expected to be published in November 2014, which is expected to be effective on January 1, 2015. PAMA also authorizes CMS to consolidate coverage policies for clinical laboratory tests among one to four laboratory-specific MACs. These same contractors may also be designated to process claims if CMS determines that such a model is appropriate.

Clinical Laboratory Improvement Amendments of 1988, or CLIA

Our clinical reference laboratories are required to hold certain federal certificates to conduct our business. Under CLIA, we are required to hold a certificate applicable to the type of laboratory examinations we perform and to comply with standards covering personnel, facilities administration, inspections, quality control, quality assurance and proficiency testing.

We have a current certificate under CLIA to perform testing at our laboratory location in San Francisco. To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards. Moreover, CLIA inspectors may make random inspections of our clinical reference laboratories. The regulatory and compliance standards applicable to the testing we perform may change over time, and any such changes could have a material effect on our business.

If our clinical reference laboratory is out of compliance with CLIA requirements, we may be subject to sanctions such as suspension, limitation or revocation of our CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties. We must maintain CLIA compliance and certification to be eligible to bill for diagnostic services provided to Medicare and Medicaid beneficiaries. If we were to be found out of compliance with CLIA requirements and subjected to sanction, our business could be harmed.

State laboratory testing

We are required to maintain a license to conduct testing in California. California laws establish standards for day-to-day operations of our laboratory in San Francisco. California laws mandate proficiency testing, which involves testing of specimens that have been specifically prepared for the laboratory. If our clinical reference laboratory is out of compliance with California standards, the California Department of Health Services, or DHS, may suspend, restrict or revoke our license to operate our clinical reference laboratory, assess substantial civil money penalties, or impose specific corrective action plans. Any such actions could materially affect our business. We maintain a current license in good standing with DHS. However, we cannot provide assurance that DHS will at all times in the future find us to be in compliance with all such laws.

Several states require the licensure of out-of-state laboratories that accept specimens from those states. For example, New York requires a laboratory to hold a permit which is issued after an on-site inspection and approval of testing methodology, and has various requirements over and above CLIA and CAP, including those for personnel qualifications, proficiency testing, physical facility, equipment, and quality control standards. Our laboratory holds the required licenses for California, Florida, Maryland, Pennsylvania and Rhode Island.

Our clinical reference laboratories are required to be licensed on a test-specific basis by New York State as an out of state laboratory and our products, as LDTs, must be approved by the New York State Department of Health, or NYDOH, before they are performed on samples from New York. Once approved, we would also

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be subject to periodic inspection by the NYDOH and required to demonstrate ongoing compliance with NYDOH regulations and standards. Because our laboratories are not licensed by New York, we are currently prohibited from testing samples from New York.

Other states may adopt similar licensure requirements in the future, which may require us to modify, delay or stop our operations in such jurisdictions. Complying with licensure requirements in new jurisdictions may be expensive, time-consuming, and subject us to significant and unanticipated delays. If we identify any other state with such requirements, or if we are contacted by any other state advising us of such requirements, we intend to follow instructions from the state regulators as to how we should comply with such requirements.

We may also be subject to regulation in foreign jurisdictions as we seek to expand international utilization of our tests or such jurisdictions adopt new licensure requirements, which may require review of our tests in order to offer them or may have other limitations such as restrictions on the transport of human blood necessary for us to perform our tests that may limit our ability to make our tests available outside of the United States.

U.S. Food and Drug Administration, or FDA

We provide our tests as laboratory-developed tests, or LDTs. CMS and certain state agencies regulate the performance of LDTs (as authorized by CLIA and state law, respectively).

Historically, the FDA, has exercised enforcement discretion with respect to most LDTs and has not required laboratories that furnish LDTs to comply with the agency's requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls). In recent years, however, the FDA has stated it intends to end its policy of general enforcement discretion and regulate certain LDTs as medical devices. To this end, on October 3, 2014, the FDA issued two draft guidance documents, entitled "Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs)" and "FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs)", respectively,—that set forth a proposed risk-based regulatory framework that would apply varying levels of FDA oversight to LDTs. The FDA has indicated that it does not intend to modify its policy of enforcement discretion until the draft guidance documents are finalized. It is unclear at this time when, or if, the draft guidance documents will be finalized, and even then, the new regulatory requirements are proposed to be phased-in consistent with the schedule set forth in the guidance (in as little as 12 months after the draft guidance is finalized for certain high-priority LDTs). Nevertheless, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time.

Legislative proposals addressing the FDA's oversight of LDTs have been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time-to-time. The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA's plans to regulate certain LDTs as medical devices is difficult to predict at this time.

If the FDA ultimately regulates certain LDTs as medical devices, whether via final guidance, final regulation, or as instructed by Congress, our tests may be subject to certain additional regulatory requirements. Complying with the FDA's requirements for medical devices can be expensive, time-consuming, and subject us to significant or unanticipated delays. Insofar as we may be required to obtain premarket clearance or approval to perform or continue performing an LDT, we cannot assure you that we will be able to obtain such authorization. Even if we obtain regulatory clearance or approval where required, such authorization may not be for the intended uses that we believe are commercially attractive or are critical to the

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commercial success of our tests. As a result, the application of the FDA's medical device requirements to our tests could materially and adversely affect our business, financial condition, and results of operations.

Failure to comply with applicable FDA regulatory requirements may trigger a range of enforcement actions by the FDA including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations, and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.

In addition, in November 2013, the FDA issued final guidance regarding the distribution of products labeled for research use only. Certain of the reagents and other products we use in our tests are labeled as research use only products. Certain of our suppliers may cease selling research use only products to us and any failure to obtain an acceptable substitute could significantly and adversely affect our business, financial condition and results of operations.

HIPAA and HITECH

Under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, the U.S. Department of Health and Human Services issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and protecting the privacy and security of protected health information used or disclosed by most healthcare providers and other covered entities and their business associates, including the business associates' subcontractors. Four principal regulations with which we are required to comply have been issued in final form under HIPAA and HITECH: privacy regulations, security regulations, the breach notification rule, and standards for electronic transactions, which establish standards for common healthcare transactions.

The privacy regulations cover the use and disclosure of protected health information by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit protected health information on behalf of a business associate. They also set forth certain rights that an individual has with respect to his or her protected health information maintained by a covered entity, including the right to access or amend certain records containing protected health information, or to request restrictions on the use or disclosure of protected health information. The security regulations establish requirements for safeguarding the confidentiality, integrity, and availability of protected health information that is electronically transmitted or electronically stored. HITECH, among other things, established certain health information security breach notification requirements. A covered entity must notify any individual whose protected health information is breached according to the specifications set forth in the breach notification rule. The HIPAA privacy and security regulations establish a uniform federal "floor" and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing protected health information or insofar as such state laws apply to personal information that is broader in scope than protected health information as defined under HIPAA. Massachusetts, for example, has a state law that protects the privacy and security of personal information of Massachusetts residents.

There are significant civil and criminal fines and other penalties that may be imposed for violating HIPAA. A covered entity or business associate is also liable for civil money penalties for a violation that is based on an act or omission of any of its agents, including a downstream business associate, as determined according to the federal common law of agency. Additionally, to the extent that we submit electronic healthcare claims and payment transactions that do not comply with the electronic data transmission standards established under HIPAA and HITECH, payments to us may be delayed or denied.

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Federal, state and foreign fraud and abuse laws

In the United States, there are various fraud and abuse laws with which we must comply and we are potentially subject to regulation by various federal, state and local authorities, including CMS, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice, and individual U.S. Attorney offices within the Department of Justice, and state and local governments. We also may be subject to foreign fraud and abuse laws.

In the United States, the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly, covertly, in cash or in kind to induce or in return for the furnishing, arranging for the furnishing of, purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program. Courts have stated that a financial arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement. The definition of "remuneration" has been broadly interpreted to include anything of value, including gifts, discounts, credit arrangements, payments of cash, consulting fees, waivers of co-payments, ownership interests, and providing anything at less than its fair market value. Although the Anti-Kickback Statute contains several exceptions, it is broad and may technically prohibit many innocuous or beneficial arrangements within the healthcare industry. Further, the U.S. Department of Health and Human Services issued a series of regulatory "safe harbors." These safe harbor regulations set forth certain provisions, which, if met, will assure healthcare providers and other parties that they will not be prosecuted under the federal Anti-Kickback Statute. Although full compliance with the statutory exceptions or regulatory safe harbors ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific statutory exception or regulatory safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued. Penalties for federal anti-kickback violations are severe, and include imprisonment, criminal fines, civil money penalties, and exclusion from participation in federal healthcare programs. Many states also have anti-kickback statutes, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Legislation defining two new federal crimes related to healthcare were recently enacted: healthcare fraud and false statements, among others, relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact, or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs.

Another development affecting the healthcare industry is the increased enforcement of the federal False Claims Act and, in particular, actions brought pursuant to the False Claims Act's "whistleblower" or "qui tam" provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal governmental payor program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has defrauded the federal government by submitting a false claim to the federal government and permit such individuals to share in

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any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties ranging from $5,500 to $11,000 for each false claim.

In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a governmental payor program.

Additionally, the civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or for a claim that is false or fraudulent. This law also prohibits the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies.

In Europe various countries have adopted anti-bribery laws providing for severe consequences, in the form of criminal penalties and/or significant fines, for individuals and/or companies committing a bribery offence. Violations of these anti-bribery laws, or allegations of such violations, could have a negative impact on our business, results of operations and reputation. For instance, in the United Kingdom, under the Bribery Act 2010, which went into effect in July 2011, a bribery occurs when a person offers, gives or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public nature. Bribery of foreign public officials also falls within the scope of the Bribery Act 2010. Under the new regime, an individual found in violation of the Bribery Act 2010, faces imprisonment of up to 10 years. In addition, the individual can be subject to an unlimited fine, as can commercial organizations for failure to prevent bribery.

Physician referral prohibitions

Under a federal law directed at "self-referral," commonly known as the "Stark Law," there are prohibitions, with certain exceptions, on referrals for certain designated health services, including laboratory services, that are covered by the Medicare program by physicians who personally, or through an immediate family member, have a financial relationship with the entity to which the referrals for designated health services are made. The prohibition also extends to payment for any testing referred in violation of the Stark Law. A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to $100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed and possible exclusion from participation in federal healthcare programs. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed, and possible exclusion from participation in federal or state health care programs. Bills submitted in violation of the Stark Law may not be paid by Medicare, and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts. Many states have comparable laws that are not limited to Medicare referrals. The Stark Law also prohibits state receipt of Federal Medicaid matching funds for prohibited referrals, but this provision of the Stark Law has not been implemented by regulations. In addition, some courts have held that the submission of claims to Medicaid that would be prohibited as self-referrals under the Stark Law for Medicare could implicate the False Claims Act.

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Corporate practice of medicine

Numerous states have enacted laws prohibiting business corporations, such as us, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine. These laws are designed to prevent interference in the medical decision-making process by anyone who is not a licensed physician. For example, California's Medical Board has indicated that determining what diagnostic tests are appropriate for a particular condition and taking responsibility for the ultimate overall care of the patient, including providing treatment options available to the patient, would constitute the unlicensed practice of medicine if performed by an unlicensed person. Violation of these corporate practice of medicine laws may result in civil or criminal fines, as well as sanctions imposed against us and/or the professional through licensure proceedings. Typically such laws are only applicable to entities that have a physical presence in the state.

Intellectual property

We rely on a combination of intellectual property rights, including trade secrets, copyrights, trademarks, customary contractual protections and, to a lesser extent, patents, to protect our core technology and intellectual property. With respect to patents, we believe that the practice of patenting individual genes, along with patenting tools and methods specific to individual genes, has impeded the progress of the genetic testing industry beyond single gene tests and is antithetical to our core principle that patients should own and control their own genomic information. Over the past three years the U.S. Supreme Court has issued a series of unanimous (9-0) decisions setting forth limits on the patentability of natural phenomena, natural laws, abstract ideas and their applications—i.e., Mayo Collaborative v. Prometheus Laboratories (2012), or Mayo, Association for Molecular Pathology v. Myriad Genetics (2013), or Myriad, and Alice Corporation v. CLS Bank (2014), or Alice. As discussed below, we believe the Mayo, Myriad and Alice decisions bring clarity to the limits to which patents may cover specific genes, mutations of such genes, or gene-specific technology for determining a patient's genomic information.

Patents

Recent U.S. Supreme Court cases have clarified that naturally occurring DNA sequences are natural phenomena which should not be patentable. On June 13, 2013, the U.S. Supreme Court decided Myriad, a case challenging the validity of patent claims held by Myriad relating to the cancer genes BRCA1 and BRCA2. The Myriad Court held that genomic DNAs that have been isolated from, or have the same sequence as, naturally occurring samples, such as the DNA constituting the BRCA1 and BRCA2 genes or fragments thereof, are not eligible for patent protection. Instead, the Myriad Court held that only those complementary DNAs (cDNAs) which have a sequence that differs from a naturally occurring fragment of genomic DNA may be patent eligible. Because it will be applied by other courts to all gene patents, the holding in Myriad also invalidates patent claims to other genes and gene variants. Prior to Myriad, on August 16, 2012, the U.S. Court of Appeals for the Federal Circuit had held that certain patent claims of Myriad directed to methods of comparing or analyzing BRCA1 and BRCA2 sequences to determine whether or not a person has a variant or mutation are unpatentable abstract processes, and Myriad did not appeal such ruling.

We do not currently have any patents or patent applications directed to the sequences of specific genes or variants of such genes, nor have we in-licensed such patents rights of any third party. We believe that correlations between specific gene variants and a person's susceptibility to certain conditions or diseases are natural laws that are not patentable under the U.S. Supreme Court's decision in Mayo. The Mayo case involved patent claims directed to optimizing, on a patient-specific basis, the dosage of a certain drug by measuring its metabolites in a patient. The Mayo Court determined that patent claims directed at detection

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of natural correlations, such as the correlation between drug metabolite levels in a patient and that drug's optimal dosage for such patient, are not eligible for patent protection. The Mayo Court held that claims based on this type of comparison between an observed fact and an understanding of that fact's implications represent attempts to patent a natural law and, moreover, when the processes for making the comparison are not themselves sufficiently inventive, claims to such processes are similarly patent-ineligible. On June 19, 2014, the U.S. Supreme Court decided Alice, where it amplified its Mayo and Myriad decisions and clarified the analytical framework for distinguishing between patents that claim laws of nature, natural phenomena and abstract ideas and those that claim patent-eligible applications of such concepts. According to the Alice Court, the analysis depends on whether a patent claim directed to a law of nature, a natural phenomenon or an abstract idea contains additional elements, an "inventive concept," that "is 'sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself"' (citing Mayo).

We believe that Mayo, Myriad and Alice not only render as unpatentable genes, gene fragments and the detection of a person's sequence for a gene, but also have the same effect on generic applications of conventional technology to specific gene sequences. For example, we believe that generic claims to primers or probes directed to specific gene sequences and uses of such primers and probes in determining a person's genetic information are not patentable. We do not currently have any patents or patent applications directed to such subject matter nor have we in-licensed such patents rights of any third party.

Unlike patents directed to specific genes, we do rely upon, in part, patent protection to protect technology that is not gene-specific and that provides us with a potential competitive advantage as we focus on making comprehensive genetic information less expensive and more broadly available to our clients. In this regard, we have one issued U.S. patent, two pending U.S. utility patent application, one PCT application and three pending U.S. provisional patent applications directed to various aspects of our laboratory, analytic and business practices. We intend to pursue further patent protection where appropriate.

Trade secrets

In addition to seeking patent protection for some of our laboratory, analytic and business practices, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain and develop our competitive position. We have developed proprietary procedures for both the laboratory processing of patient samples and the analysis of the resulting data to generate clinical reports. For example, we have automated aspects of our processes for curating information about known variants, identifying variants in an individual's sequence information, associating those variants with known information about their potential effects on disease, and presenting that information for review by personnel responsible for its interpretation and for the delivery of test reports to physicians. We try to protect these trade secrets, in part, by taking reasonable steps to keep them confidential. This includes entering into nondisclosure and confidentiality agreements with parties who have access to them, such as our employees and certain third parties. We also enter into invention or patent assignment agreements with our employees and consultants that obligate them to assign to us any inventions developed in the course of their work for us. However, we may not enter into such agreements with all relevant parties, and these parties may not abide by the terms of their agreements. Despite measures taken to protect our intellectual property, unauthorized parties might copy or independently develop and commercially exploit aspects of our technology or obtain and use information that we regard as proprietary.

Trademarks

We work hard to achieve a high level of quality in our operations and to provide our clients with a superior experience when interacting with us. As a consequence, our brand is very important to us, as it is

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a symbol of our reputation and representative of the goodwill we seek to generate with our clients. As a consequence, we have invested significant resources in protection of our trademarks. To date, we have filed for trademark protection for INVITAE as well as our logo (circle design) and INVITAE with the logo. Registrations for INVITAE have been obtained in eight countries and are currently pending in more than 20 countries. Applications for our logo (circle design) are currently pending in more than 18 countries, and one application is pending for INVITAE with the logo.

Legal proceedings

On November 25, 2013, the University of Utah Research Foundation, the Trustees of the University of Pennsylvania, HSC Research and Development Limited Partnership, Endorecherche, Inc. and Myriad (referred to collectively as the Myriad Plaintiffs) filed a complaint in the U.S. District Court in the District of Utah (referred to as the Utah Action), alleging that certain of our genetic testing services infringe certain claims of U.S. Patent Nos. 7,753,441; 6,951,721; 7,250,497; 6,033,857; 6,051,379; 7,470,510; 7,622,258; and 7,838,237 (referred to collectively as the Myriad Patents). On November 26, 2013, we filed a complaint for declaratory judgment in the U.S. District Court in the Northern District of California (referred to as the California Action), asserting that the Myriad Patents are invalid and we do not infringe them, and the Myriad Plaintiffs have counterclaimed alleging that we infringe the Myriad Patents. Although the Utah Action has been dismissed, on February 19, 2014, the Joint Panel on Multidistrict Litigation granted the Myriad Plaintiffs' motion to consolidate for pre-trial proceedings all actions concerning the Myriad Patents (referred to as the MDL Proceedings), with the MDL Proceedings taking place in the District of Utah. Upon the conclusion of the MDL Proceedings, any remaining aspects of the California Action would be transferred back to the Northern District of California for further proceedings, if needed.

Environmental matters

Our operations require the use of hazardous materials (including biological materials) which subject us to a variety of federal, state and local environmental and safety laws and regulations. Some of these regulations provide for strict liability, holding a party potentially liable without regard to fault or negligence. We could be held liable for damages and fines as a result of our, or others', business operations should contamination of the environment or individual exposure to hazardous substances occur. We cannot predict how changes in laws or new regulations will affect our business, operations or the cost of compliance.

Facilities

Our corporate headquarters and laboratory operations are located in San Francisco, California, where we lease and occupy approximately 7,795 square feet of space. The lease for our headquarters expires in September 2016. Additionally, we sublease approximately 8,852 square feet of laboratory and office space in a nearby building under an agreement that expires in February 2017. We also lease approximately 8,348 square feet of office space in Palo Alto, California pursuant to an agreement that expires in March 2020. We have additional laboratory space in Santiago, Chile.

We believe that our facilities are adequate for our current needs and that additional space will be available on commercially reasonable terms if required.

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Our culture and employees

Growing and retaining a strong team is critical to our long-term success. Our multidisciplinary team includes bioinformaticians, clinical and medical geneticists, commercial and managed care experts, genetic counselors, scientists, software engineers, web developers, graphic designers and lab automation specialists, as well as staff in our administrative and corporate teams. We pride ourselves on the quality and integrity of the people we hire, and we strive to foster a motivating and unique culture in which we hope they will thrive.

Our people have widely varied skills and capabilities, and our success hinges on our ability to apply all of those skills and capabilities in concert to achieve our mission. We relish individuality, and we strive to make sure that in efforts to create a cohesive working environment, we preserve diversity of views and approaches.

Our mission and relentless focus on our clients' needs drive attitudes and behaviors across the company. To support our values, we implement the following strategies:

Attracting and Maintaining Exceptional Employees.  We believe that versatile and experienced employees, management and directors provide significant advantages in the rapidly evolving market in which we compete. Since inception, we have devoted and will continue to devote substantial efforts to building a talented employee base and to attracting an experienced management team with a track record in fast-growing organizations. We provide significant autonomy, much more than would typically be given, to the individual and to leaders within the organization but hold each employee accountable through a steady-state peer review feedback systems in which every employee is evaluated by peers on a weekly basis. This system provides us with a large amount of performance data on a consistent basis as a starting point for developing and mentoring our employees.

Commitment to Experimentation and Data-Informed Decisions.  We strive to make decisions informed by data, and look for counterintuitive information that might go against the conventional wisdom in the industry to give us a business advantage. We experiment with different commercial and technology hypotheses across our business and make decisions based on supporting data. We intend to research and develop not only new technology processes but business strategy as well.

Transparency.  We strive to be transparent with our clients, employees and shareholders. We believe the best execution happens where information is broadly shared. We view a state of heightened transparency within companies and with the public as a growing trend that will only accelerate in the future.

As of October 31, 2014, we had 144 employees, the significant majority of which are based in San Francisco or Palo Alto, California. Of these employees, 58 were in research and development, 28 were in commercial laboratory operations, 35 were in sales and marketing and 23 were in general and administrative. None of our employees are represented by a labor union, and we consider our employee relations to be good.

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Management

Executive officers and directors

The following table sets forth, as of October 31, 2014, certain information regarding our current executive officers and directors:

 
Name
  Age
  Position
 

Randal W. Scott, Ph.D. 

  57   Chairman, Chief Executive Officer and Director

Sean E. George, Ph.D. 

  41   President, Chief Operating Officer, Director and Co-Founder

Lisa Alderson

  43   Chief Commercial Officer

Lee Bendekgey

  57   Chief Financial Officer, General Counsel and Secretary

Eric Aguiar, M.D.(     )

  52   Director

Geoffrey S. Crouse(     )

  43   Director
 

(1)    Member of our Compensation Committee

(2)    Member of our Audit Committee

(3)    Member of our Nominating and Corporate Governance Committee

Executive officers

Randal W. Scott, Ph.D. has served as our Chairman and Chief Executive Officer since August 2012 and as a director since 2010. From 2000 through August 2012, Dr. Scott held a number of positions at Genomic Health, Inc., a public-held genomic information company which he co-founded in 2000, most recently as the Chief Executive Officer of a wholly-owned subsidiary of Genomic Health, and as a director. Prior to that, Dr. Scott served as Executive Chairman of the Board of Genomic Health, from January 2009 until March 2012 and Chairman of the Board and Chief Executive Officer from August 2000 until December 2008. Dr. Scott was a founder of Incyte Corporation, which at the time was a genomic information company, and served in various roles from 1991 through 2000, including Chairman of the Board, President and Chief Scientific Officer. Dr. Scott holds a B.S. in Chemistry from Emporia State University and a Ph.D. in Biochemistry from the University of Kansas. We believe that Dr. Scott is qualified to serve on our board due to his years of experience in the life sciences industry and his extensive executive leadership and management experience at public companies.

Sean E. George, Ph.D. is one of our co-founders and has served as our President and Chief Operating Officer since August 2012. He has also served as a director since January 2010. He initially served as our Chief Executive Officer from January 2010 to August 2012. Prior to co-founding Invitae, Dr. George served as Chief Operating Officer from 2007 to November 2009 at Navigenics, Inc., a personalized medicine company. Previously, he served as Senior Vice President of Marketing and Senior Vice President, Life Science Business at Affymetrix, Inc., a provider of life science and molecular diagnostic products, as well as Vice President, Labeling and Detection Business at Invitrogen Corporation, a provider of tools to the life sciences industry, during his tenure there from 2002 to 2007. Dr. George holds a B.S. in Microbiology and Molecular Genetics from the University of California Los Angeles, an M.S. in Molecular and Cellular Biology from the University of California Santa Barbara, and a Ph.D. in Molecular Genetics from the University of California Santa Cruz. We believe that Dr. George is qualified to serve on our board of directors due to his extensive experience in the life science industry, his broad leadership experience with life science companies and his educational background.

Lisa Alderson has served as our Chief Commercial Officer since September 2012. Ms. Alderson is also a founding partner of Tech Care Now, an information technology and service company, and has served on its

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board since January 2011. She previously was the Executive Vice President of Plum District, an e-commerce company, from July 2011 to May 2012. From January 2010 to January 2011, Ms. Alderson pursued personal interests. Prior to that, she served as Chief Executive Officer and President of CrossLoop, Inc., a marketplace for technical services, from April 2007 to January 2010, and as President of Cinema Circle, Inc., a subscription-based home entertainment company, from 2004 to 2006. Previously, she was part of the start-up team at Genomic Health, Inc., from 2000 to 2002, and a Manager of Strategic Planning at The Walt Disney Company from 1997 to 1999. Ms. Alderson holds a B.A. in Journalism and International Studies from Colorado State University and an M.B.A. from Harvard Business School.

Lee Bendekgey has served as our Chief Financial Officer and General Counsel since November 2013. Mr. Bendekgey is the former General Counsel of DNAnexus, Inc., a cloud-based genome informatics and data management company, where he served from September 2011 to October 2013. From March 2009 until September 2011, Mr. Bendekgey pursued personal interests. Prior to that, he was Chief Financial Officer and General Counsel for Nuvelo, Inc., a biopharmaceutical company, from July 2004 to March 2009; and he served as General Counsel and Chief Financial Officer for Incyte Corporation from 1998 to July 2004. Mr. Bendekgey holds a B.A. in French and Political Science from Kalamazoo College and a J.D. from Stanford Law School.

Non-employee directors

Eric Aguiar, M.D. has been a member of our board of directors since September 2010. He has been a partner in the venture capital firm Thomas, McNerney & Partners since 2007. Prior to joining that firm, he was a Managing Director of HealthCare Ventures, a healthcare focused venture capital firm, from 2001 to 2007. Dr. Aguiar was Chief Executive Officer and a director of Genovo, Inc., a biopharmaceuticals company focused on gene delivery and gene regulation, from 1998 to 2000. Dr. Aguiar previously served as a director of Amarin Pharmaceuticals, a publicly-held biopharmaceutical company, as well as on the boards of numerous private companies including companies in the life sciences industry. He is a member of the Board of Overseers of the Tufts School of Medicine and a member of the Council on Foreign Relations. He received an M.D. with honors from Harvard Medical School and a B.A. in Arts and Sciences from Cornell University. Dr. Aguiar was also a Luce Fellow and is a Chartered Financial Analyst. We believe that Dr. Aguiar is qualified to serve on our board of directors due to his extensive experience with in the life science field, his experience on various boards, and his management and financial experience with life sciences companies.

Geoffrey S. Crouse has served on our board of directors since March 2012. Since September 2012 he has served as Chief Executive Officer of Cord Blood Registry, a company focusing on storing stem cells from umbilical cords. He previously served as Chief Operating Officer at Immucor, Inc., a publicly traded in vitro diagnostics company, from August 2009 to April 2011. From April 2011 through September 2012, Mr. Crouse was a consultant. Prior to Immucor, he served as Vice President of the life sciences business at Millipore Corporation, a publicly traded provider of technologies, tools and services for the life science industry, from 2006 to 2009. Prior to joining Millipore, he worked at Roche, a pharmaceuticals and diagnostics company, where he held various roles from 2003 to 2006. Mr. Crouse holds a B.A. in English and Japanese from Boston College and an M.B.A. and Masters of Public Health from the University of California Berkeley. We believe that Mr. Crouse is qualified to serve on our board of directors due to his extensive experience in the life sciences industry and his management and financial experience with life sciences companies.

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Voting arrangements

Pursuant to a fifth amended and restated voting agreement that we entered into with certain holders of our preferred stock:

the holders of a majority of the outstanding shares of common stock have the right to nominate one director to our board of directors, currently designated as Sean E. George;

Thomas, McNerney & Partners II, L.P. has the right to nominate one director to our board of directors, currently designated as Eric Aguiar;

the holders of a majority of the outstanding shares of Series C preferred stock have the right to nominate one director to our board of directors, currently designated as Randal W. Scott; and

our board of directors has the right to nominate four individuals, subject to certain independence requirements, provided that (1) if our board of directors is not able to agree upon such nominee(s) then such seats shall remain vacant, and (2) Baker Bros. Advisors L.P. may nominate one of these directors. One of these directors, who is not nominated by Baker Bros. Advisor L.P., is currently designated as Geoffrey S. Crouse.

The voting agreement will terminate upon the completion of this offering.

Board composition

Our amended and restated bylaws, which will become effective upon completion of this offering, provide that our board shall consist of such number of directors as the board of directors may from time to time determine. Our board of directors will initially consist of                  directors. The authorized number of directors may be changed by resolution of our board of directors. Vacancies on our board can be filled by resolution of our board of directors. Upon the completion of this offering, our board of directors will be divided into three classes, each serving staggered, three-year terms:

Our Class I directors will be                  and their terms will expire at the first annual meeting of stockholders following the date of this prospectus;

Our Class II directors will be                  and their terms will expire at the second annual meeting of stockholders following the date of this prospectus; and

Our Class III directors will be                  and their terms will expire at the third annual meeting of stockholders following the date of this prospectus.

As a result, only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective terms.

Corporate governance

We believe our corporate governance initiatives comply with the Sarbanes-Oxley Act and the rules and regulations of the SEC adopted thereunder. In addition, we believe our corporate governance initiatives comply with the rules of the NYSE. After this offering, our board of directors will continue to evaluate our corporate governance principles and policies.

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Our board of directors has adopted a code of business conduct and ethics that applies to each of our directors, officers and employees. The code addresses various topics, including:

compliance with laws, rules and regulations;
confidentiality;
conflicts of interest;
corporate opportunities;
competition and fair dealing;
payments or gifts from others;
health and safety;
insider trading;
protection and proper use of company assets;
record keeping; and
giving and accepting gifts.

Our board of directors has adopted a code of ethics for senior financial officers applicable to our Chief Executive Officer and Chief Financial Officer as well as other key management employees addressing ethical issues. Upon completion of this offering, the code of business conduct and the code of ethics will each be posted on our website. The code of business conduct and the code of ethics can only be amended by the approval of a majority of our board of directors. Any waiver to the code of business conduct for an executive officer or director or any waiver of the code of ethics may only be granted by our board of directors or our nominating and corporate governance committee and must be timely disclosed as required by applicable law. We also intend to implement whistleblower procedures that establish formal protocols for receiving and handling complaints from employees. Any concerns regarding accounting or auditing matters reported under these procedures will be communicated promptly to our audit committee.

Director independence

Our board of directors determined that                       and                        are "independent directors" as defined under the rules of the NYSE. There are no family relationships among any of our directors or executive officers. The NYSE permits a phase-in period of up to one year for an issuer listing its securities on the NYSE in connection with its initial public offering in order meet the requirement that a majority of the board of directors be comprised of independent directors. We intend to take advantage of this phase-in period.

Board leadership structure

Our board of directors is currently chaired by Randal W. Scott. Our board believes that having a combined chairman of the board and chief executive officer is the most effective leadership structure for our company at this time. The board believes that Dr. Scott is the director best situated to identify strategic opportunities and focus the activities of the board due to his full-time commitment to our business and his industry-specific experience. The board also believes that the combined role of chairman and chief executive officer promotes effective execution of strategic imperatives and facilitates information flow between management and the board.

Role of the board in risk oversight

Our board of directors is responsible for overseeing the overall risk management process at the company. The responsibility for managing risk rests with executive management while the committees of our board

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of directors and our board of directors as a whole participate in the oversight process. Our board of directors' risk oversight process builds upon management's risk assessment and mitigation processes, which include reviews of long-term strategic and operational planning, executive development and evaluation, regulatory and legal compliance, and financial reporting and internal controls.

Board committees

We have established an audit committee, compensation committee and nominating and corporate governance committee, each of which will operate, upon the completion of this offering, under a charter that has been approved by our board. The composition of each committee and its respective charter will be effective upon the completion of this offering, and copies of each charter will be posted on the corporate governance section of our website at www.invitae.com. We believe that the composition of these committees meets the criteria for independence under, and the functioning of these committees complies with the applicable requirements of, the Sarbanes-Oxley Act, and the current rules and regulations of the SEC and the NYSE. We intend to comply with future requirements as they become applicable to us. Each committee has the composition and responsibilities described below.

Audit committee

Messrs.                   serve on our audit committee.                  is the chairperson of this committee. Our audit committee assists our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions, and is directly responsible for the approval of the services performed by our independent accountants and reviewing of their reports regarding our accounting practices and systems of internal accounting controls. Our audit committee also oversees the audit efforts of our independent accountants and takes actions as it deems necessary to satisfy itself that the accountants are independent of management. Our audit committee is also responsible for monitoring the integrity of our consolidated financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters. Our board of directors has determined that                  is an audit committee financial expert, as defined by the rules promulgated by the SEC, and each of the members of our audit committee has the requisite financial sophistication as defined under the applicable rules and regulations of NYSE. The SEC and the NYSE permit a phase-in period of up to one year for an issuer registering securities in an initial public offering to meet the heightened audit committee independence requirements. Under the initial public offering phase-in period, (1) all but one of the members of the audit committee are exempt from the SEC independence requirements for up to 90 days from the date of effectiveness of the registration statement; and (2) a minority of the members of the audit committee are exempt from the independence requirements for up to one year from the date of effectiveness of the registration statement. Therefore, pursuant the initial public offering phase-in period, (1) one member of the audit committee must satisfy the heightened independence requirement at the outset, (2) a majority of the members must satisfy the heightened independence requirement within 90 days, and (3) all members must satisfy the heightened independence requirement within one year from effectiveness of our initial public offering registration statement. We intend to take advantage of such phase-in period.

Compensation committee

Messrs.                   serve on our compensation committee.                  is the chairperson of this committee. Our compensation committee assists our board of directors in meeting its responsibilities with regard to oversight and determination of executive compensation and assesses whether our compensation structure establishes appropriate incentives for officers and employees. Our compensation committee reviews and

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makes recommendations to our board of directors with respect to our major compensation plans, policies and programs. In addition, our compensation committee reviews and makes recommendations for approval by the independent members of our board of directors regarding the compensation for our executive officers, establishes and modifies the terms and conditions of employment of our executive officers and administers our stock option plans. The NYSE permits a phase-in period of up to one year for an issuer registering securities in an initial public offering that follows the same parameters as the SEC heightened independence requirements discussed above for audit committee service. We intend to take advantage of such phase-in period.

Nominating and corporate governance committee

Messrs.                   serve on our nominating and corporate governance committee.                  is the chairperson of this committee. Our nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of the board of directors. In addition, our nominating and corporate governance committee is responsible for overseeing our corporate governance guidelines, and reporting and making recommendations to the board of directors concerning corporate governance matters. If an issuer utilizes a nominating committee for director nominations, the NYSE permits a phase-in period of up to one year for an issuer registering securities in an initial public offering that follows the same parameters as the SEC heightened independence requirements discussed above for audit committee service. We intend to take advantage of such phase-in period.

Compensation committee interlocks and insider participation

None of the members of our compensation committee is or has in the past served as one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of a board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Director compensation

The following table shows certain information with respect to the compensation of our non-employee directors who served during any part of the fiscal year ended December 31, 2013:

   
Name
  Fees earned or
paid in cash

  Option
awards

  Total
 
   

Eric Aguiar, M.D.(1)

             

Geoffrey S. Crouse

      $ 3,971 (2) $ 3,971  
   

(1)    Dr. Aguiar serves on our board as the director nominee of Thomas, McNerney & Partners II, L.P. and is not compensated by us for his services.

(2)    On April 1, 2013, we granted Mr. Crouse an option to purchase 25,000 shares of our common stock at an exercise price of $0.21 per share, with 10,000 shares vested at grant and the remaining 15,000 shares vesting monthly over 12 months. The amount in this column represents the aggregate fair value of the option award computed as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock Compensation, or FASB ASC Topic 718, rather than amounts paid to or realized by Mr. Crouse. See the notes to our consolidated financial statements for a discussion of assumptions made in determining the grant date fair value and compensation expense of our stock options.

On October 24, 2014, we granted Mr. Crouse an option to acquire 15,000 shares of our common stock, vesting in equal monthly installments over one year, commencing on February 27, 2014. The option has an exercise price of $1.45 per share.

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Standard compensation arrangements

Employee directors do not receive any compensation for service as a member of our board of directors. While we reimburse our non-employee directors for their reasonable out-of-pocket costs and travel expenses in connection with their attendance at board and committee meetings, we do not have a standard compensation policy for our non-employee directors, other than Mr. Crouse, who currently is paid $20,000 annually and eligible to receive an annual option grant to purchase 15,000 shares of common stock. However, we intend to review and consider future proposals regarding non-employee director compensation upon completion of our initial public offering.

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Executive compensation

2013 summary compensation table

The following table presents information concerning the total compensation of our named executive officers, for services rendered to us in all capacities during the fiscal year ended December 31, 2013. Our named executive officers consist of our Chief Executive Officer and the two other highest paid executive officers who were serving at fiscal year-end:

   
Name and principal position
  Fiscal
year

  Salary
($)

  Option
awards
($)(1)

  Total
($)

 
   

Randal W. Scott, Ph.D.
Chairman and Chief Executive Officer

    2013   $ 200,000       $ 200,000  

Sean E. George, Ph.D.
President and Chief Operating Officer

    2013   $ 280,000       $ 280,000  

Lisa Alderson(2)
Chief Commercial Officer

    2013   $ 239,583       $ 239,583  
   

(1)    No equity awards were granted to our named executive officers during the fiscal year ended December 31, 2013.

(2)    Ms. Alderson was part time for a portion of the year. Her annualized salary was $287,500.

2013 outstanding equity awards at fiscal year-end

The following table presents information regarding outstanding equity awards held by our named executive officers as of December 31, 2013:

   
 
   
  Option awards   Stock awards  
Name
  Grant
date

  Number of
securities
underlying
unexercised
options
(exercisable)
(#)

  Number of
securities
underlying
unexercised
options
(unexercisable)
(#)

  Option
exercise
price
($/share)

  Option
expiration
date

  Number of
shares or
units that
have not
vested
(#)

  Market
value of
shares or
units that
have not
vested
(#)

 
   

Randal W. Scott, Ph.D. 

                         

Sean E. George, Ph.D. 

  11-16-12     66,666     133,334 (1) $ 0.21   11-16-22          

Lisa Alderson

  11-16-12     83,333     166,667 (1) $ 0.21   11-16-22              

  11-16-12                           66,667 (1)(2) $   (3)
   

(1)    The shares vest over a four-year period at the rate of 25% of the shares on the one-year anniversary of the vesting start date of August 31, 2012 and 1/48th of the shares on a monthly basis thereafter over the subsequent three-year period.

(2)    Represents shares acquired upon the early exercise of a time-based stock option, which shares are subject to a right of repurchase at the original exercise price paid for the shares if the executive terminates employment before the shares have vested.

(3)    As there was no public market value for our common stock as of December 31, 2013, we have set the fair market value at the assumed initial public offering price of $              per share, the midpoint of the preliminary price range set forth on the cover page of this prospectus.

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Additional equity awards

We granted options to purchase shares of our common stock on February 28, 2014 and October 15, 2014 to the following executive officers: (1) Sean E. George, 300,000 shares on each date; (2) Lee Bendekgey, 50,000 shares and 150,000 shares, respectively; and (3) Lisa Alderson, 200,000 shares and 150,000 shares, respectively. Each option has an exercise price of $0.57 and $1.45 per share. The options vest as to 25% of the shares on the one-year anniversary of the grant date and 1/48th of the shares vest each month thereafter over the remaining three years.

Employment arrangements

In July 2010, we entered into an executive employment agreement with Sean E. George, Ph.D., our President and Chief Operating Officer. This agreement was subsequently terminated in November 2014. Pursuant to the executive employment agreement, Dr. George was provided the right to purchase 1,000,000 shares of our common stock at $0.0001 per share, subject to a restricted stock purchase agreement dated July 15, 2010. The restricted shares have now fully vested. The restricted stock purchase agreement imposes restrictions on the transfer, grants us a right of first refusal and subjects the shares to a 180-day lock-up period after the effective date of this offering. The right of first refusal terminates upon the completion of this offering. Under his executive employment agreement prior to its termination, in the event of a "change of control" (such as a merger or reorganization which results in our stockholders immediately prior to such transaction holding less than 50% of the voting power of the surviving entity, or the sale or transfer of all or substantially all of our assets), the vesting for any unvested equity awards held by Dr. George would have accelerated and become immediately exercisable. Subject to his execution of a general release of all claims against us, the executive employment agreement provided prior to its termination that if Dr. George's employment with us was terminated by us without "cause" or not in connection with his death or disability, or if following a "change of control" he resigned for "good reason" (such as a material reduction in base salary or responsibilities, or a material change in the geographic location of his primary work facility), then Dr. George would have been entitled to receive the following: (1) a cash payment equal to 12 months of his then-existing base salary, payable in monthly installments; and (2) if he elected to continue health insurance coverage under COBRA for himself or his eligible dependents, we would have reimbursed him for the applicable premiums until the earlier of a 12-month period or until he or his eligible dependents became covered under similar plans or became ineligible for coverage. If such a termination occurred outside of a "change of control" context, Dr. George also would have received accelerated vesting of any unvested equity awards in an amount equal to the number of shares that would have vested had he remained employed for an additional 12 months.

2010 Stock Incentive Plan

Our 2010 Stock Incentive Plan, or the 2010 Stock Plan, was initially adopted by our board of directors on September 17, 2010 and approved by our stockholders on October 8, 2010. The 2010 Stock Plan was last amended on August 26, 2014. The purpose of the 2010 Stock Plan is to offer selected persons an opportunity to acquire a proprietary interest in our success by acquiring shares of our common stock.

Our 2010 Stock Plan permits the direct award or sale of shares and for the grant of nonstatutory stock options and restricted stock to our employees, directors and consultants and any of our parents' or subsidiaries' employees and consultants. Incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, may also be granted but only to our employees and our parents' or subsidiaries' employees.

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Share reserve.    As of the date of this prospectus, 15,354,167 shares of common stock have been authorized for issuance under the 2010 Stock Plan. As of October 31, 2014, options to purchase a total of 11,813,977 shares of common stock were outstanding under the 2010 Stock Plan. If an option to acquire shares expires or is cancelled for any reason, the shares allocable to the unexercised portion of such option will become available for future award under the 2010 Stock Plan. Shares of common stock that have previously been issued under the 2010 Stock Plan that are reacquired by us pursuant to a forfeiture provision, right of repurchase or right of first refusal will revert to and again become available for future issuance under the 2010 Stock Plan.

Administration.    Our board of directors or a committee appointed thereby administers the 2010 Stock Plan. The board may also authorize one or more officers to designate employees to receive awards and/or to determine the number of awards to be received, subject to a total number set by the board. All actions of the board will be final and binding on all persons.

Stock options.    The board may grant incentive and/or nonstatutory stock options under our 2010 Stock Plan; provided that incentive stock options are only granted to employees. The exercise price of options granted under the plan must be equal to or greater than 100% of the fair market value of our common stock on the date of grant. The term of an option may not exceed ten years; provided, however, that an incentive stock option held by an optionee who owns more than 10% of the total combined voting power of all classes of our stock, any parent or any of our subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value of our common stock on the grant date. The exercise price for an option may be paid in cash or check. In addition, the board may permit other forms of payment such as surrender of shares, services rendered, promissory note, cashless exercise, pledge of shares. Subject to the provisions of our 2010 Stock Plan, the board determines the remaining terms of the options (e.g., exercisability and vesting). The board may permit an optionee to exercise his or her option as to shares that have not vested. The optionee may exercise his or her option, to the extent vested, following termination of the optionee's service for the period specified in the award agreement, such period to be at least 30 days if termination is due to any reason other than cause, death or disability (or six months in the case of termination due to death or disability). However, in no event may an option be exercised later than the expiration of its term.

Restricted shares.    Restricted shares may be offered under the 2010 Stock Plan. The board will advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of shares that such person will be entitled to purchase, the price to be paid (if any), and the time within which such person must accept such offer.

Transferability/forfeiture.    Unless determined otherwise by the board, the 2010 Stock Plan generally does not allow for options to be transferred in any manner other than by will or the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the board, a nonqualified option may be transferred to a revocable trust or as permitted by California securities law and Rule 701 of the Securities Act. Shares awarded or sold under the 2010 Stock Plan or received upon the exercise of options may be subject to certain forfeiture conditions, rights to repurchase, rights of first refusal, market stand-off or other transfer restrictions as the board may determine and as set forth in the applicable award agreement.

Adjustments.    In the event that any dividend or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of our shares or other securities, or other change in our corporate structure affecting the shares occurs, the board will adjust the number of

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shares that may be delivered under the 2010 Stock Plan and/or the number and price of shares covered by each outstanding award.

Corporate transaction.    If we are a party to a merger or consolidation, or in the event of a sale of all or substantially all of our stock or assets, outstanding awards under the 2010 Stock Plan will be subject to the agreement governing the transaction. The terms of such agreement may provide that (a) outstanding options continue if we are the surviving entity, (b) the 2010 Stock Plan and outstanding options are assumed by the surviving entity, (c) options of the surviving entity are substituted, (d) acceleration of vesting followed by cancellation of the options, or (e) settlement of the intrinsic value of options followed by cancellation of the options, in each case without the Optionee's consent. In the event of a change in control, the vesting for stock options granted to outside directors will be automatically accelerated and our right to repurchase shares underlying such options will lapse. Pursuant to the 2010 Stock Plan, a "change in control" results from: (1) a merger, consolidation or reorganization if persons who were not our stockholders immediately prior to such merger, consolidation or reorganization own immediately after such merger, consolidation or reorganization 50% or more of the voting power of the surviving entity and any direct or indirect parent thereof; (2) a sale, transfer or other disposition of all or substantially all of our assets or our stockholders approve a plan of complete liquidation; or (3) the aggregation by any person of 50% or more of the combined voting power of our outstanding securities (unless any of the foregoing transactions is (x) an initial public offering or sale of securities, (y) a private financing that is approved by the board, or (z) is effected only for the purpose of changing our state of incorporation or creating a holding company).

Plan amendments and termination.    Our board may at any time amend, alter, suspend or terminate the 2010 Stock Plan. However, the board will obtain stockholder approval of any 2010 Stock Plan amendment to the extent necessary and desirable to comply with applicable law. A termination or amendment of the 2010 Stock Plan will not impair the rights of any participant under the 2010 Stock Plan, unless mutually agreed to otherwise by such participant and us.

Upon the completion of this offering, the 2010 Stock Plan will be terminated and no shares of our common stock will remain available for future issuance under the 2010 Stock Plan. Shares originally reserved for issuance under our 2010 Stock Plan but which are not issued or subject to outstanding awards on the effective date of the 2015 Stock Incentive Plan, and shares subject to outstanding awards under our 2010 Stock Plan on the effective date of the 2015 Stock Incentive Plan that are subsequently forfeited or terminated for any reason before being exercised or settled, including shares subject to vesting restrictions that are subsequently forfeited, will become available for awards under our 2015 Stock Incentive Plan.

2015 Stock Incentive Plan

Our 2015 Stock Incentive Plan, or the 2015 Stock Plan, was adopted by our board of directors in                  , 2015. We expect the 2015 Stock Plan will become effective upon the execution and delivery of the underwriting agreement for this offering. Once the 2015 Stock Plan is effective, no further grants will be made under the 2010 Stock Plan.

The 2015 Stock Plan provides for the granting of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and the granting of nonstatutory stock options to employees, non-employee directors, advisors and consultants. The 2015 Stock Plan also provides for the grants of restricted stock, stock appreciation rights, stock unit and cash-based awards to employees, non-employee directors, advisors and consultants.

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Administration.    The compensation committee of our board of directors, or our board of directors acting as a committee, will administer the 2015 Stock Plan, including the determination of the recipient of an award, the number of shares or amount of cash subject to each award, whether an option is to be classified as an incentive stock option or nonstatutory option, and the terms and conditions of each award, including the exercise and purchase prices and the vesting or duration of the award.

At the discretion of our board of directors, our compensation committee may consist of two or more non-employee directors. To the extent required by our board of directors, the composition of our compensation committee may satisfy the requirements for plans intended to qualify for exemption under Rule 16b-3 of the Exchange Act and Section 162(m) of the Internal Revenue Code. Our board of directors may appoint one or more separate committees of our board of directors, each consisting of one or more members of our board of directors, to administer our 2015 Stock Plan with respect to employees who are not subject to Section 16 of the Exchange Act. Subject to applicable law, our board of directors may also authorize one or more officers to designate employees, other than employees who are subject to Section 16 of the Exchange Act, to receive awards under our 2015 Stock Plan and/or determine the number of such awards to be received by such employees subject to limits specified by our board of directors.

Authorized shares.    Under our 2015 Stock Plan, the aggregate number of shares of our common stock authorized for issuance may not exceed (1)                     plus (2) the sum of number of shares subject to outstanding awards under the 2010 Stock Plan as of the 2015 Stock Plan's effective date that are subsequently forfeited or terminated for any reason before being exercised or settled, plus the number of shares subject to vesting restrictions under the 2010 Stock Plan on the 2015 Stock Plan's effective date that are subsequently forfeited, plus the number of shares reserved but not issued or subject to outstanding grants under the 2010 Stock Plan as of the 2015 Stock Plan's effective date. In addition, the number of shares that have been authorized for issuance under the 2015 Stock Plan will be automatically increased on the first day of each fiscal year beginning on                  , 2015 and ending on (and including)                   , 2024, in an amount equal to the lesser of (1)          % of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (2) another amount determined by our board of directors. Shares subject to awards granted under the 2015 Stock Plan that are forfeited or terminated before being exercised or settled, or are not delivered to the participant because such award is settled in cash, will again become available for issuance under the 2015 Stock Plan. Shares withheld to satisfy the grant, exercise price or tax withholding obligation related to an award will again become available for issuance under the 2015 Stock Plan. However, shares that have actually been issued shall not again become available unless forfeited. No more than                  shares may be delivered upon the exercise of incentive stock options granted under the 2015 Stock Plan plus, to the extent allowable under applicable tax law, any shares that again become available for issuance under the 2015 Stock Plan. During any time when the tax deduction limitations of Section 162(m) of the Internal Revenue Code apply to awards under the 2015 Stock Plan, and options or stock appreciation rights are intended to qualify as "performance-based compensation" under Section 162(m), no person may receive options or stock appreciation rights in any calendar year for an aggregate of more than                  shares, and no more than two times this amount in the first year of employment.

Types of awards

Stock options.    A stock option is the right to purchase a certain number of shares of stock, at a certain exercise price, in the future. Under our 2015 Stock Plan, incentive stock options and nonstatutory options must be granted with an exercise price of at least 100% of the fair market value of our common stock on the date of grant. Incentive stock options granted to any holder of more than 10% of our voting shares must have an exercise price of at least 110% of the fair market value of our common stock on the date of

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grant. No incentive stock option can be granted to an employee if as a result of the grant, the employee would have the right in any calendar year to exercise for the first time one or more incentive stock options for shares having an aggregate fair market value in excess of $100,000. The stock option agreement specifies the date when all or any installment of the option is to become exercisable. We expect that 1/4th of the total number of shares subject to the options will vest and become exercisable 12 months after the vesting commencement date for options granted, and the remaining options will vest and become exercisable at a rate of 1/48th of the total number of shares subject to the options each month thereafter. Each stock option agreement sets forth the term of the options, provided that the term of an incentive stock option is prohibited from exceeding ten years (five years in the case of an incentive stock option granted to any holder of more than 10% of our voting shares), and the extent to which the optionee will have the right to exercise the option following termination of the optionee's service with us. Payment of the exercise price may be made in cash or, if provided for in the stock option agreement evidencing the award, (1) by surrendering, or attesting to the ownership of, shares which have already been owned by the optionee, (2) by delivery of an irrevocable direction to a securities broker to sell shares and to deliver all or part of the sale proceeds to us in payment of the aggregate exercise price, (3) by delivery of an irrevocable direction to a securities broker or lender to pledge shares and to deliver all or part of the loan proceeds to us in payment of the aggregate exercise price, (4) by a "net exercise" arrangement, (5) by delivering a full-recourse promissory note or (6) by any other form that is consistent with applicable laws, regulations and rules.

Restricted stock.    Restricted stock is a share award that may be subject to vesting conditioned upon continued service, the achievement of performance objectives or the satisfaction of any other condition as specified in a restricted stock agreement. Participants who are granted restricted stock awards generally have all of the rights of a stockholder with respect to such stock, other than the right to transfer such stock prior to vesting. Subject to the terms of the 2015 Stock Plan, our compensation committee will determine the terms and conditions of any restricted stock award, including any vesting arrangement, which will be set forth in a restricted stock agreement to be entered into between us and each recipient. Restricted stock may be awarded for such consideration as our compensation committee may determine, including without limitation cash, cash equivalents, full-recourse promissory notes, future services or services rendered prior to the award, without cash payment by the recipient.

Stock unit.    Stock units give recipients the right to acquire a specified number of shares of stock (or cash amount) at a future date upon the satisfaction of certain conditions, including any vesting arrangement, established by our compensation committee and as set forth in a stock unit agreement. Unlike restricted stock, the stock underlying stock units will not be issued until the stock units have vested and are settled, and recipients of stock units generally will have no voting or dividend rights prior to the time the vesting conditions are satisfied and the award is settled. At our compensation committee's discretion, stock units may provide for the right to dividend equivalents. Our compensation committee may elect to settle vested stock units in cash or in common stock or in a combination of cash and common stock. Subject to the terms of the 2015 Stock Plan, our compensation committee will determine the terms and conditions of any stock unit award, which will be set forth in a stock unit agreement to be entered into between us and each recipient.

Stock appreciation rights.    Stock appreciation rights typically will provide for payments to the recipient based upon increases in the price of our common stock over the exercise price of the stock appreciation right. The exercise price of a stock appreciation right will be determined by our compensation committee, which shall not be less than the fair market value of our common stock on the date of grant. Our

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compensation committee may elect to pay stock appreciation rights in cash or in common stock or in a combination of cash and common stock.

Cash-based awards.    A cash-based award is denominated in cash. The compensation committee may grant cash-based awards in such number and upon such terms as it shall determine. Payment, if any, will be made in accordance with the terms of the award, and may be made in cash or in shares of common stock, as determined by the compensation committee.

Performance-based awards.    Awards under our 2015 Stock Plan may be made subject to the attainment of performance criteria. Awards of restricted stock, stock units or cash-based awards that are intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code will be subject to the attainment of one or more pre-established performance goals, including cash flows, earnings per share, earnings before interest, taxes and amortization, return on equity, total stockholder return, share price performance, return on capital, return on assets or net assets, revenue, income or net income, operating income or net operating income, operating profit or net operating profit, operating margin or profit margin, return on operating revenue, return on invested capital, market segment shares, costs, expenses, initiation or completion of research activities, initiation or completion of other development programs, other milestones with respect to research activities or development programs, implementation or completion of critical projects, commercial milestones and other milestones with respect to the growth and development of our business. The maximum aggregate number of shares that may be subject to restricted stock or stock unit awards intended to qualify as performance-based compensation under this tax rule granted to any individual in any calendar year is                  shares, and no more than two times this amount in the first year of employment. The maximum aggregate amount of cash that may be payable under cash-based awards intended to qualify as performance-based compensation under this tax rule granted to any individual in any calendar year is $              .

Other plan features

Under the 2015 Stock Plan:

Unless the agreement evidencing an award expressly provides otherwise, no award granted under the plan may be transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to shares issued under such award), other than by will or the laws of descent and distribution, provided, however, that an incentive stock option may be transferred or assigned only to the extent consistent with Section 422 of the Internal Revenue Code.

In the event of a recapitalization, stock split or similar capital transaction, our compensation committee will make appropriate and equitable adjustments to the number of shares reserved for issuance under the 2015 Stock Plan, the limitations regarding the total number of shares underlying awards given to an individual participant in any calendar year, the number of shares that can be issued as incentive stock options, the number of shares subject to outstanding awards and the exercise price under each outstanding option or stock appreciation right.

If we are involved in a merger or other reorganization, outstanding awards will be subject to the agreement or merger or reorganization. Such agreement will provide for (1) the continuation of the outstanding awards by us, if we a surviving corporation, (2) the assumption or substitution of the outstanding awards by the surviving corporation or its parent or subsidiary, (3) immediate vesting, exercisability and settlement of the outstanding awards followed by their cancellation, or (4) settlement of the intrinsic value of the outstanding awards (whether or not vested or exercisable) in cash, cash equivalents, or equity (including cash or equity subject to deferred vesting and delivery consistent with

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    the vesting restrictions applicable to such award or the underlying shares) followed by cancellation of such awards.

The administrator of the 2015 Stock Plan may modify, extend or renew outstanding awards or may accept the cancellation of outstanding awards (to the extent not previously exercised), whether or not granted under the 2015 Stock Plan, in return for the grant of new awards for the same or a different number of shares and at the same or a different exercise price, or in return for the grant of a different award for the same or a different number of shares, all without stockholder approval. However, no modification of an award shall, without the consent of the individual participant, materially impair his or her rights or obligations under such award.

Our board of directors may amend or terminate the plan at any time, subject to stockholder approval where required by applicable law. Any amendment or termination may not materially impair the rights of holders of outstanding awards without their consent. No incentive stock option may be granted after the tenth anniversary of the earlier of (1) the date the 2015 Stock Plan was adopted by our board of directors, or (2) the date the plan was approved by our stockholders.

Employee Stock Purchase Plan

Our board of directors adopted the Employee Stock Purchase Plan, or ESPP, in                  2015, to be effective on the date on which the initial public offering is effective. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and the purpose of the ESPP is to provide eligible employees with an opportunity to increase their proprietary interest in the success of our company by purchasing common stock from us at favorable terms and to pay for their purchases through payroll deductions. Our board of directors believes that establishing an ESPP will enable us to attract, retain and motivate valued employees. A total of                  shares of common stock will initially be reserved for issuance under the ESPP plus an annual increase beginning in the fiscal year that begins January 1, 2016. The annual increase will equal the least of (1)                     percent (          %) of the outstanding shares of stock on such date, or (2) such lesser amount the board of directors determines. No annual increase shall be added more than ten years after the ESPP's effective date.

Administration.    Except as noted below, our ESPP will be administered by a committee of our board of directors. The committee will have full power and authority, subject to the provisions of the ESPP, necessary for the proper administration of the plan. The committee may adopt such rules, guidelines and forms as it deems appropriate to implement the ESPP, including sub-plans, which the committee may establish for the purpose of facilitating participation by non-U.S. employees and compliance with foreign laws. Our board of directors may, in its sole discretion, at any time, resolve to administer the ESPP.

Eligibility.    Each of our employees and of each present or future subsidiary, as designated by the committee, whose customary employment is more than five months per calendar year and more than 20 hours per week, and who is employed on the day preceding the start of any offering period will be eligible to participate in the ESPP. The ESPP will permit an eligible employee to purchase common stock through payroll deductions (and by cash or check if permitted by the committee), which may not be less than 1% nor more than 15% of the employee's eligible compensation. No participant will be able to purchase stock under the ESPP if immediately after electing to purchase stock, the participant would own stock (including stock such employee may purchase under the ESPP or other outstanding options) representing 5% or more of the total combined voting power or value of all classes of our or any parent or subsidiary company's stock. No participant will be able to purchase more than such number of shares as may be determined by the committee with respect to a single offering period, or purchase period, if applicable. In addition, no participant is permitted to accrue, under the ESPP and all similar purchase plans

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of ours or of our parent or subsidiary companies, a right to purchase shares of our stock having a fair market value in excess of $25,000 (determined at the time the right is granted) for each calendar year. Participants will be able to withdraw their accumulated payroll deductions prior to the end of the offering period, or purchase period, if applicable, in accordance with the terms of the offering. Participation in the ESPP will end automatically on termination of employment with us.

Offering periods and purchase price.    Our ESPP will be implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, except as noted below, the committee may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. During each purchase period, payroll deductions will accumulate, without interest. On the last day of the purchase period, i.e., the purchase date, accumulated payroll deductions will be used to purchase common stock for employees participating in the offering.

The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than the lesser of (1) 85% of the fair market value per share of our common stock on the purchase date, or (2) 85% of the fair market value per share of our common stock on the last trading day preceding the offering date (or, in the case of an offering period that commences on the initial public offering of our stock, 85% of the price at which one share is offered to the public). The committee will determine the purchase period and the purchase price of shares that may be purchased pursuant to each offering.

Reset feature.    The committee may specify that if the fair market value of a share of our common stock on any purchase date within a particular offering period is less than or equal to the fair market value on the start date of that offering period, then the offering period will automatically terminate and the employee in that offering period will automatically be transferred and enrolled in a new offering period, which will begin on the next day following such purchase date.

Changes to capital structure.    In the event that there is a specified type of change in our capital structure, such as a stock split, appropriate adjustments will be made to (a) the number of shares reserved under the ESPP, (b) the individual and aggregate participant share limitations described in the ESPP and (c) the price of shares that any participant has elected to purchase.

Corporate reorganization.    Immediately before a corporate reorganization such as a merger or sale of substantially all of the Company, the offering period and any purchase period then in progress shall terminate and stock will be purchased with the accumulated payroll deductions, unless the ESPP is assumed by the surviving corporation or its parent corporation under the plan of merger or consolidation.

Amendment and termination.    Our board of directors will have the right to amend, suspend or terminate the ESPP at any time. Any increase in the aggregate number of shares of stock to be issued under the ESPP (other than the annual increase noted above) is subject to stockholder approval. Any other amendment is subject to stockholder approval only to the extent required under applicable law or regulation.

401(k) plan

We maintain a 401(k) plan that is tax-qualified for our employees in the United States, including our named executive officers. We do not offer employer matching or make other employer contributions to our 401(k) plan.

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Limitation on liability and indemnification matters

Our amended and restated certificate of incorporation that will be in effect following this offering contains provisions that limit the personal liability of our directors for monetary damages to the fullest extent permitted by the General Corporation Law of the State of Delaware, or the DGCL. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

any breach of the director's duty of loyalty to us or our stockholders;

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or any transaction from which the director derived an improper personal benefit.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that we are required to indemnify our directors, in each case to the fullest extent permitted by the DGCL. Our bylaws also provide that we shall advance expenses incurred by a director in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of the DGCL. We have entered into agreements to indemnify our directors and expect to continue to enter into agreements to indemnify our directors. Prior to the closing of the offering, we plan to amend and restate our indemnification agreements with our directors and to enter into similar agreements with each of our officers. With certain exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys' fees, judgments, fines and settlement amounts incurred by any of our directors in any action or proceeding. We believe that these certificate of incorporation and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors. We also maintain directors' and officers' liability insurance.

The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty of care. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

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Certain relationships and related party transactions

In addition to the cash and equity compensation arrangements of our directors and named executive officers discussed above under the section entitled "Management," the following is a description of transactions since January 1, 2011 to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with or immediate family members of any of the foregoing, had or will have a direct or indirect material interest.

Sales of common and convertible preferred stock

The following table summarizes purchases of our common stock and convertible preferred stock since January 1, 2011 by certain of our directors, executive officers and holders of more than 5% of our capital stock and their affiliated entities. Each outstanding share of our preferred stock will automatically convert into one share of our common stock immediately prior to the completion of this offering.

   
 
   
  Shares of preferred stock    
 
 
  Shares of common stock
  Aggregate purchase price
 
Purchaser
  Series A(5)
  Series B(6)
  Series C(7)
  Series D(8)
  Series E(9)
  Series F(10)
 
   

Executive Officers and Directors:

                                                 

Randal W. Scott, Ph.D.(1)

                16,315,788         3,921,568     1,000,000   $ 23,499,999  

Lisa Alderson

    100,000 (2)           26,315         19,607       $ 75,998  

Geoffrey S. Crouse

    115,554 (3)                         $ 10,910  

5% Stockholders:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Baker Brothers Life Sciences, L.P.(4)

                    8,000,000     9,803,921     12,500,000   $ 49,999,999  

BlackRock, Inc.(4)

                            25,000,000   $ 50,000,000  

Thomas, McNerney & Partners II, L.P.(4)

        11,363,636         5,263,155         3,267,973     2,500,000   $ 19,999,996  

Genomic Health, Inc. 

            4,181,818     4,796,968         3,267,973     1,000,000   $ 13,857,118  
   

(1)   Prior to joining our company in August 2012, Dr. Scott was an affiliate of Genomic Health, Inc.

(2)   We issued 100,000 shares of common stock to Ms. Alderson upon the early exercise of a stock option subject to a nonstatutory stock option, or NSO, agreement dated November 16, 2012. Until such time as the shares vest, the shares are subject to repurchase by us following the termination of her employment at a purchase price of $0.21 per share. The shares vest over a four-year period, and an aggregate of 54,166 shares were vested as of October 31, 2014. The NSO agreement also imposes restrictions on the transfer of the stock.

(3)   We issued an aggregate of 115,554 shares of common stock to Mr. Crouse, of which 90,554 shares were upon the early exercise of a stock option subject to a NSO agreement dated March 7, 2012, and 25,000 shares are subject to an NSO agreement dated April 1, 2013. The shares subject to the April 1, 2013 NSO agreement are fully vested. Until such time as the shares issued pursuant to the March 7, 2012 NSO agreement vest, the shares are subject to repurchase by us following the termination of his service at a purchase price equal to $0.0625 per share. These shares vest over a four-year period, and an aggregate of 58,482 shares were vested as of October 31, 2014. The NSO agreements also impose restrictions on the transfer of the stock.

(4)   Includes securities purchased by affiliates of the purchaser listed in the table. See "Principal stockholders" for additional information.

(5)   Issued in March 2011 at $0.44 per share.

(6)   Issued in March 2011 at $0.44 per share.

(7)   Issued on various dates between August 2012 and October 2012 at $0.95 per share. Of the shares issued to Randal W. Scott, 600,000 shares were subsequently transferred without consideration to, or for the benefit of, members of his family.

(8)   Issued in May 2013 at $1.25 per share.

(9)   Issued on various dates between October 2013 and December 2013 at $1.53 per share.

(10) Issued in August and October 2014 at $2.00 per share.

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Convertible notes

Pursuant to a Note Purchase Agreement dated as of May 22, 2012, as amended on June 27, 2012 and July 26, 2012, Thomas, McNerney & Partners II, L.P. and affiliates provided us with bridge loans in the aggregate principal amount of $1,400,000 and Genomic Health, Inc. provided us with bridge loans in the aggregate principal amount of $600,000. The notes representing these loans accrued interest at 8% per annum and, on August 8, 2012, these notes, comprising $2,000,000 in principal plus $18,000 in accrued interest, were converted into shares of our Series C preferred stock at the price paid by other purchasers of our Series C preferred stock.

Investors' rights agreement

In August 2014, we entered into a fifth amended and restated investors' rights agreement with certain holders of our outstanding convertible preferred stock, including Genomic Health, Inc., an entity with which our director Randal W. Scott was affiliated when it made its initial investment in our convertible preferred stock in 2011, and Thomas, McNemey & Partners II, L.P. and affiliates, entities with which our director Eric Aguiar is affiliated, as well as Baker Brothers Life Sciences, L.P. and its affiliates, BlackRock, Inc. and its affiliates, and funds advised by Wellington Management Company LLP. This agreement provides that certain holders of common stock issuable upon conversion of our preferred stock have the right to demand that we file a registration statement or request that their shares of common stock be covered by a registration statement that we are otherwise filing. With respect to this offering, the registration rights have been validly waived. In addition to the registration rights, the investors' rights agreement provides for certain information rights, board observer rights and rights of first offer if we propose to offer or sell any new equity securities. The provisions of the investors' rights agreement, other than those relating to registration rights, will terminate upon completion of this offering. See "Description of capital stock—Investors' rights agreement" for additional information.

Right of first refusal and co-sale agreement

In August 2014, we entered into a fifth amended and restated right of first refusal and co-sale agreement with certain holders of our preferred stock, including Genomic Health, Inc., an entity with which our director Randal W. Scott was affiliated when it made its initial investment in our convertible preferred stock in 2011, and Thomas, McNemey & Partners II, L.P. and affiliates, entities with which our director Eric Aguiar is affiliated, as well as Baker Brothers Life Sciences, L.P. and its affiliates, BlackRock, Inc. and its affiliates, and funds advised by Wellington Management Company LLP. This agreement provides certain holders of preferred stock a right of purchase and of co-sale in respect of sales of shares of capital stock and for a market stand-off following an initial public offering. These rights of purchase and co-sale will terminate immediately prior to the completion of this offering.

Voting agreement

In August 2014, we entered into a fifth amended and restated voting agreement with certain holders of our preferred stock, including Genomic Health, Inc., an entity with which our director Randal W. Scott was affiliated when it made its initial investment in our convertible preferred stock in 2011, and Thomas, McNemey & Partners II, L.P. and affiliates, entities with which our director Eric Aguiar is affiliated, as well as Baker Brothers Life Sciences, L.P. and its affiliates, BlackRock, Inc. and its affiliates, and funds advised by Wellington Management Company LLP. This agreement contains provisions regarding voting and size of our board of directors, board composition and removal rights, and drag-along sale rights. The voting

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agreement will terminate upon the completion of this offering. See "Management—Voting arrangements" for additional information.

Management rights

In connection with our sale of convertible preferred stock to our investors, we are party to management rights letters with certain purchasers of our convertible preferred stock, including Thomas, McNerney & Partners II, L.P. and its affiliates, BlackRock, Inc. and its affiliates, and OrbiMed Private Investments V, L.P., pursuant to which such entities were granted certain management rights, including the right to consult with and advise our management on significant business issues, attend board of directors meetings and receive board materials in certain cases, review our financial data and operating plans, examine our books and records and inspect our facilities. These management rights will terminate upon the completion of this offering.

Stock options granted to executive officers and directors

We have granted stock options to our executive officers and directors, as more fully described in "Executive compensation—Additional equity awards" and "Management—Director compensation," respectively.

Restricted stock purchase agreement

Pursuant to restricted stock purchase agreements dated July 15, 2010, each of our co-founders, including Sean E. George, was provided the right to purchase 1,000,000 shares of our common stock at $0.0001 per share. The restricted shares have now fully vested. The restricted stock purchase agreements impose restrictions on the transfer, grant us a right of first refusal and subject the shares to a 180-day lock-up period after the effective date of this offering. The right of first refusal terminates upon the completion of this offering.

Indemnification agreements

We have entered into indemnification agreements with our directors. We plan to amend and restate these agreements and to enter into similar indemnification agreements with each of our officers prior to the closing of the offering. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify these individuals to the fullest extent permitted by Delaware law. See "Management—Limitation on liability and indemnification matters."

Related party transaction policy

We intend to adopt a written policy that our executive officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us without the prior consent of our audit committee, or other independent members of our board of directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, our audit committee is to consider the relevant facts and circumstances available and deemed relevant to our audit committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar

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circumstances and the extent of the related party's interest in the transaction. All of the transactions described above were entered into prior to the adoption of such policy.

Although we have not had a written policy for the review and approval of transactions with related persons prior to the closing of this offering, our board of directors has historically reviewed and approved any transaction where a director or officer had a financial interest, including all of the transactions described above. Prior to approving such a transaction, the material facts as to a director's or officer's relationship or interest as to the agreement or transaction were disclosed to our board of directors. Our board of directors would take this information into account when evaluating the transaction and in determining whether such a transaction was fair to us and in the best interests of all of our stockholders. In addition, for each related party transaction described above, the disinterested directors in the context of each such transaction approved the applicable agreement and transaction.

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Principal stockholders

The following table sets forth information regarding the number of shares of common stock beneficially owned on October 31, 2014, and immediately following consummation of this offering, by:

each person who is known by us to beneficially own 5% or more of our common stock;
each of our named executive officers and directors; and
all of our executive officers and directors as a group.

We have determined beneficial ownership in accordance with SEC rules. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.

Applicable percentage ownership prior to the offering is based on 146,740,332 shares of common stock outstanding at October 31, 2014, but does not reflect the exercise of any options to purchase common stock. Shares beneficially owned include shares of common stock acquired upon the early exercise of stock options granted under our 2010 Stock Plan, for which we have a right of repurchase. Applicable percentage ownership after the offering assumes that                   shares of common stock will be outstanding upon completion of this offering. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock underlying options held by that person that are currently exercisable or will become exercisable within 60 days of October 31, 2014. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, ownership includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person. Unless otherwise noted, shares are owned of record and beneficially by the named person or entity.

Except as otherwise set forth in footnotes to the table below, the address of each of the persons listed below is c/o Invitae Corporation, 458 Brannan Street, San Francisco, California 94107.

   
 
   
  Percentage of shares
beneficially owned
 
 
  Number of
shares
beneficially
owned

 
Name and address of beneficial owner
  Prior to this
offering

  After this
offering

 
   

Executive Officers and Directors:

                   

Randal W. Scott, Ph.D. 

    20,637,356     14.1%        

Sean E. George, Ph.D.(1)

    1,128,029     *        

Lisa Alderson(2)

    291,755     *        

Eric Aguiar, M.D.(3)

    22,394,764     15.3%        

Geoffrey S. Crouse(4)

    128,054     *        

All current executive officers and directors as a group (6 persons)(5)

    44,676,209     30.4%        

5% Stockholders:

                   

Baker Brothers Life Sciences, L.P. and affiliates(6)

    30,303,921     20.7%        

BlackRock, Inc.(7)

    25,000,000     17.0%        

Thomas, McNerney & Partners II, L.P. and affiliates(3)

    22,394,764     15.3%        

Genomic Health, Inc.(8)

    13,246,759     9.0%        
   

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*      Represents beneficial ownership of less than 1%.

(1)    Includes options to purchase 116,666 shares of common stock exercisable within 60 days of October 31, 2014.

(2)    Includes options to purchase 145,833 shares of common stock exercisable within 60 days of October 31, 2014 and 100,000 shares of common stock acquired upon the early exercise of options to purchase common stock, of which 45,834 shares are subject to our right of repurchase as of October 31, 2014.

(3)    Consists of 22,097,812 shares held by Thomas, McNerney & Partners II, L.P. ("Thomas McNerney"): 79,536 shares held by TMP Associates II, L.P. ("TMP Associates"); and 217,416 shares held by TMP Nominee II, LLC ("TMP Nominee"). Thomas, McNerney & Partners II, LLC ("TMP LLC") is the general partner of each of Thomas McNerney and TMP Associates. Eric Aguiar is a manager of TMP LLC and has shared voting and investment control over the shares held by each of Thomas McNerney and TMP Associates and indirectly shares investment control over the shares held by TMP Nominee. Dr. Aguiar disclaims beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The mailing address of Thomas McNerney and its affiliates is 60 South Sixth Street, Suite 3620, Minneapolis, MN 55402.

(4)   Includes options to purchase 12,500 shares of common stock exercisable within 60 days of October 31, 2014 and 90,554 shares of common stock acquired upon the early exercise of options to purchase common stock, of which 32,072 shares are subject to our right of repurchase as of October 31, 2014.

(5)    Includes options to purchase an aggregate of 371,249 shares of common stock exercisable within 60 days of October 31, 2014 and 190,554 shares of common stock acquired upon the early exercise of options to purchase common stock, of which 77,906 shares are subject to our right of repurchase as of October 31, 2014.

(6)   Consists of 26,608,608 shares held by Baker Brothers Life Sciences, L.P. ("Baker Brothers"); 1,911,410 shares held by 667, L.P. (account #1) ("667 #1"); 1,343,672 shares held by 667, L.P. (account #2) ("667 #2"); and 440,231 shares held by 14159, L.P. ("14159"). Baker Bros Advisors LP ("Baker Advisors") is the investment advisor of 667#1 and 667#2, Baker Brothers and 14159, and has voting and dispositive power with respect to these shares. Julian C. Baker and Felix J. Baker are managing members of Baker Advisors. Baker Advisors, Julian C. Baker and Felix J. Baker disclaim beneficial ownership of the securities held by the funds except to the extent of their pecuniary interest therein. The mailing address of Baker Brothers and its affiliates is 667 Madison Avenue, 21st Floor, New York, NY 10065.

(7)    BlackRock, Inc. is the ultimate parent holding company of certain advisory subsidiaries that have the power to vote or dispose of the shares. Of the 25,000,000 shares listed above, 14,195,190 are for the benefit of BlackRock Global Allocation Fund, Inc., 2,896,633 are for the benefit of BlackRock Global Allocation V.I. Fund of BlackRock Variable Series Funds, Inc., 64,815 are for the benefit of BlackRock Global Allocation Portfolio of BlackRock Series Fund, Inc., 247,498 are for the benefit of BlackRock Global Allocation Fund (Australia), 167,841 are for the benefit of MassMutual Select BlackRock Global Allocation Fund, 839,273 are for the benefit of JNL/BlackRock Global Allocation Fund of JNL Series Trust, 5,603,429 are for the benefit of BlackRock Global Funds—Global Allocation Fund, 369,458 are for the benefit of BlackRock Global Funds—Global Dynamic Equity Fund, 186,439 are for the benefit of AZL BlackRock Global Allocation Fund, a Series of Allianz Variable Insurance Products Trust, and 429,424 are for the benefit of BlackRock Global Allocation Collective Fund (collectively, the "BlackRock Funds"). On behalf of BlackRock Investment Management, LLC and BlackRock Institutional Trust Company, N.A., the Investment Manager, Adviser, Sub-Adviser and/or Trustee (as applicable) of the BlackRock Funds, Dennis Stattman, as a Managing Director of BlackRock Investment Management, LLC and BlackRock Institutional Trust Company, N.A., has voting and investment power over the shares held by the BlackRock Funds. Dennis Stattman expressly disclaims beneficial ownership of all shares held by the BlackRock Funds. The address of the BlackRock Funds, BlackRock Investment Management, LLC, BlackRock Institutional Trust Company, N.A. and Dennis Stattman is c/o BlackRock Investment Management, LLC, 1 University Square Drive, Princeton, NJ 08540.

(8)   The address of Genomic Health is 301 Penobscot Drive, Redwood City, CA 94036.

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Description of capital stock

General

The following is a summary of the rights of our common stock and preferred stock and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws, as they will be in effect upon the completion of this offering. For more detailed information, please see our amended and restated certificate of incorporation and amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus is part.

Immediately following the completion of this offering, our authorized capital stock will consist of                   shares, par value of $0.0001 per share, of which:

              shares will be designated as common stock; and
              shares will be designated as preferred stock.

Upon completion of this offering, all outstanding convertible preferred stock will be converted into common stock. As of October 31, 2014, we had outstanding the following shares of preferred stock:

11,693,179 shares of Series A preferred stock;
4,181,818 shares of Series B preferred stock;
31,112,750 shares of Series C preferred stock;
8,000,000 shares of Series D preferred stock;
26,143,777 shares of Series E preferred stock; and
60,000,000 shares of Series F preferred stock;

all of which are automatically convertible into an aggregate of 141,131,524 shares of common stock immediately prior to the completion of this offering. We also had 5,608,808 shares of common stock outstanding as of October 31, 2014, held of record by 36 stockholders. In addition, as of October 31, 2014,                   shares of our common stock were subject to outstanding options. For additional information on our capitalization, see "Capitalization."

Common stock

Pursuant to our amended and restated certificate of incorporation that will be in effect immediately prior to the completion of this offering, the holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. This amended and restated certificate of incorporation does not provide for cumulative voting in the election of directors. Subject to the rights, if any, of the holders of any outstanding series of preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the board of directors out of legally available funds. However, the current policy of the board of directors is to retain earnings, if any, for operations and growth. Upon our liquidation, dissolution or winding-up, subject to the rights, if any, of the holders of our preferred stock, the holders of common stock are entitled to share ratably in all assets that are legally available for distribution. The holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of the board of directors and issued in the future.

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Preferred stock

The board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of preferred stock in one or more series without stockholder approval. Each such series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as is determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

Fifth amended and restated investors' rights agreement

Upon completion of this offering, the holders of an aggregate of 146,740,332 shares of our common stock that were issued or are issuable upon the conversion of our preferred stock, assuming the conversion is effective immediately prior to the completion of this offering, will be entitled to the rights described below with respect to registration of the resale of such shares under the Securities Act pursuant to the fifth amended and restated investors' rights agreement by and among us and certain of our stockholders dated August 26, 2014, as amended by that certain omnibus approval and amendment dated October 9, 2014.

Registration of shares of common stock in response to the exercise of the following rights would result in the holders being able to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We generally must pay all expenses, other than underwriting discounts and commissions, related to any registration effected pursuant to the exercise of these registration rights.

The registration rights terminate upon the earlier of the seventh anniversary of this offering or the occurrence of a deemed liquidation event (as such term is defined in our certificate of incorporation) and distribution of proceeds to or escrow for the benefit of the holders.

Demand registration rights.    If, at any time after the earlier of February 26, 2016 or 180 days after the effective date of the registration statement of this offering, the holders of 20% of the then outstanding registrable securities issued or issuable upon the conversion of our preferred stock request that we file a Form S-1 registration statement with respect to the registrable securities then outstanding, we may be required to register their shares if the anticipated aggregate offering price, net of selling expenses, is not less than $5 million, subject to certain exceptions. Depending on certain conditions, however, we may defer such registration for up to 60 days. The underwriters of any underwritten offering have the right to limit the number of shares registered by these holders for marketing reasons.

Piggyback registration rights.    If at any time we propose to register any shares of our common stock under the Securities Act after this offering, subject to certain exceptions, the holders of registrable securities will be entitled to notice of the registration and to include their share of registrable securities in the registration. The underwriters of any underwritten offering have the right to limit the number of shares registered by these holders for marketing reasons, subject to certain exceptions.

Form S-3 registration rights.    If at any time when we are eligible to use the Form S-3 registration statement, the holders of at least 10% of then outstanding registrable securities issued or issuable upon conversion of our preferred stock may request that we effect a registration on Form S-3 under the Securities Act, so long as the proposed aggregate offering price of the shares to be registered by the holders requesting registration is at least $2 million, subject to certain exceptions.

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Anti-takeover effects of Delaware law and our amended and restated certificate of incorporation and bylaws

Certain provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws to become effective upon completion of this offering could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging such proposals, including proposals that are priced above the then-current market value of our common stock, because, among other reasons, the negotiation of such proposals could result in an improvement of their terms.

Certificate of Incorporation and Bylaws.    Our amended and restated certificate of incorporation and amended and restated bylaws to become effective upon completion of this offering include provisions that:

divide our board of directors into three classes, each serving staggered, three-year terms;

authorize the board of directors to issue, without further action by the stockholders, up to              shares of undesignated preferred stock;

require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

specify that special meetings of our stockholders can be called only by the board of directors, the chairman of the board, or the chief executive officer;

establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors;

provide that directors may be removed only for cause;

establish the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain derivative actions or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, or any action asserting a claim governed by the internal affairs doctrine;

require the affirmative vote of holders of at least 662/3% of the total votes eligible to be cast in the election of directors to amend, alter, change or repeal our bylaws; and provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.

Delaware anti-takeover statute.    We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:

prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

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upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder.

Generally, a "business combination" includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the "interested stockholder" and an "interested stockholder" is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation's outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may discourage business combinations or other attempts that might result in a premium over the market price for the shares of common stock held by our stockholders.

The provisions of DGCL, our amended and restated certificate of incorporation and our amended and restated bylaws to become effective upon completion of this offering could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Transfer agent and registrar

The transfer agent and registrar for our common stock is                       . The transfer agent's address is                       .

Listing

We intend to apply to list our common stock on the New York Stock Exchange under the symbol "NVTA."

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Material U.S. federal income tax considerations to non-U.S. holders

The following is a summary of material U.S. federal income tax consequences applicable to non-U.S. holders (as defined below) with respect to the purchase, ownership and disposition of our common stock, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service, or the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions.

This summary does not address the tax considerations arising under the laws of any U.S. state or local jurisdiction or any non-U.S. jurisdiction or under U.S. federal gift, generation-skipping and, except to the limited extent set forth below, estate tax laws or the potential application of the Medicare Contribution tax. In addition, this discussion does not address tax considerations applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

banks, insurance companies or other financial institutions;

persons subject to the alternative minimum tax;

tax-exempt organizations;

dealers in securities or currencies;

"controlled foreign corporations," "passive foreign investment companies," and corporations that accumulate earnings to avoid U.S. federal income tax;

persons who acquire our common stock through the exercise of employee stock options or otherwise as compensation for services;

partnerships or entities classified as partnerships for U.S. federal income tax purposes, or any investors in such entities;

traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

persons that own, or are deemed to own, more than five percent of our common stock (except to the extent specifically set forth below);

certain former citizens or long-term residents of the U.S.;

persons who hold our common stock as a position in a hedging transaction, "straddle," "conversion transaction" or other risk reduction transaction;

persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code (generally, for investment purposes); or persons deemed to sell our common stock under the constructive sale provisions of the Internal Revenue Code.

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If a partnership or entity classified as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors.

You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate, generation-skipping or gift tax rules or under the laws of any U.S. state or local or any non-U.S. or other taxing jurisdiction or under any applicable tax treaty.

Non-U.S. holder defined

For purposes of this discussion, you are a non-U.S. holder if you are a beneficial owner of our common stock (other than a partnership or entity classified as a partnership for U.S. federal income tax purposes) that for U.S. federal income tax purposes is not:

an individual citizen or resident of the United States;

a corporation or other entity taxable as a corporation for U.S. federal income tax purposes created or organized in the U.S. or under the laws of the U.S. or any political subdivision thereof; or

an estate whose income is subject to U.S. federal income tax regardless of its source; or a trust (1) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (2) which has a valid election in effect to be treated as a U.S. person.

Distributions

We have not made any distributions on our common stock and do not intend to do so in the foreseeable future. However if we make distributions on our common stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero. Any excess will be treated as gain from the sale or other disposition of the common stock and will be treated as described below under "—Gain on disposition of common stock."

Subject to discussion below regarding backup withholding and FATCA, any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty, unless the dividends are effectively connected with your conduct of a U.S. trade or business, as discussed below. In order to receive a reduced treaty rate, you must provide us or the relevant paying agent with an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or other appropriate version of IRS Form W-8 prior to the distribution date properly certifying qualification for the reduced rate. If you hold our common stock through a financial institution or other agent acting on your behalf, you will be required to provide appropriate documentation to the agent, which then will be required to provide certification to the applicable withholding agent, either directly or through other intermediaries.

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Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a permanent establishment maintained by you in the U.S.) generally will be subject to U.S. federal income tax at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. Payment of effectively connected dividends that are included in your gross income generally will be exempt from withholding tax if you provide us or the relevant paying agent with an IRS Form W-8ECI or other applicable IRS Form W-8 prior to the distribution date properly certifying such exemption.

In general, non-U.S. holders will be required to periodically update their IRS Form W-8.

If you are eligible for a reduced rate of withholding tax pursuant to a tax treaty, you may be able to obtain a refund of any excess amounts withheld if you timely file an appropriate claim for refund with the IRS.

Gain on disposition of common stock

Subject to the discussion below regarding backup withholding and "FATCA," you generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

the gain is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment maintained by you in the U.S.), in which case you will be required to pay tax on the net gain derived from the sale (net of certain deductions or credits) under regular graduated U.S. federal income tax rates, and if you are a non-U.S. holder that is a corporation, you may also be subject to a branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty;

you are an individual who is present in the U.S. for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met, in which case you will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by U.S. source capital losses (even though you are not considered a resident of the U.S.) subject to an applicable income tax treaty providing otherwise; or

our common stock constitutes a U.S. real property interest by reason of our status as a "U.S. real property holding corporation" for U.S. federal income tax purposes, or a USRPHC, at any time within the shorter of the five-year period preceding the disposition or your holding period for our common stock. In general, a corporation is a USRPHC if the fair market value of its U.S. real property interests (as defined in the Internal Revenue Code and applicable Treasury regulations) equals or exceeds 50% of the sum of the fair market value of its worldwide (U.S. and foreign) real property interests and its other assets used or held for use in a trade or business. We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as a U.S. real property interest only if you actually or constructively hold

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    more than five percent of such regularly traded common stock at any time during the five year (or shorter) period that is described above.

Information reporting and backup withholding

Generally, we must report annually to the IRS the amount of any distribution paid to you, your name and address, and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.

Payments of dividends or of proceeds on the disposition of common stock made to you may be subject to additional information reporting and backup withholding at a current rate of 28% unless you establish an exemption, for example by properly certifying your non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if the relevant paying agent has actual knowledge, or reason to know, that you are a U.S. person. Payment of the proceeds from a disposition of our common stock by a non-U.S. holder effected through a non-U.S. office of a non-U.S. broker generally will not be subject to information reporting or backup withholding if the payment is not received in the U.S. However, information reporting, but generally not backup withholding, will apply to such a payment if the broker has certain connections with the U.S. unless the broker has documentary evidence in its records that the beneficial owner thereof is a non-U.S. holder and specified conditions are met or an exemption is otherwise established.

Backup withholding is not an additional tax; rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

FATCA

Legislation commonly referred to as FATCA generally imposes a 30% U.S. withholding tax on dividends on, and the gross proceeds of a disposition of, our common stock paid to (1) a "foreign financial institution" (as specifically defined under these rules) unless such institution enters into an agreement with the U.S. Treasury to withhold on certain payments and to collect and disclose information regarding U.S. account holders of such institution (which may include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption and (2) a non-financial foreign entity unless such entity provides the payor with a certification identifying the substantial direct and indirect U.S. owners of the entity, certifies that there are none of these or otherwise establishes an exemption. The withholding obligation under FATCA with respect to dividends began July 1, 2014 and with respect to the gross proceeds from sales or other dispositions of our common stock will not begin until January 1, 2017. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their own tax advisors regarding the possible implications of this legislation on their investment in our common stock. You are encouraged to consult with your own tax advisor regarding the possible implications of this legislation on your investment in our common stock.

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U.S. Federal Estate Tax

Our common stock beneficially owned by an individual who is not a citizen or resident of the United States (as defined for U.S. federal estate tax purposes) at the time of his or her death will generally be includable in the decedent's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of the purchase, ownership and disposition of our common stock, including the consequences of any proposed change in applicable laws.

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Shares eligible for future sale

Before this offering, there has not been a public market for shares of our common stock. Future sales of substantial amounts of shares of our common stock, including shares issued upon the exercise of outstanding options, in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future.

Upon the completion of this offering a total of                   shares of common stock will be outstanding, assuming that there are no exercises of options after                           , 2014. Of these shares, all shares of common stock sold in this offering by us, plus any shares sold upon exercise of the underwriters' option to purchase additional shares from us, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless these shares are held by "affiliates," as that term is defined in Rule 144 under the Securities Act, or are subject to the lock-up agreements described below.

The remaining shares of common stock will be "restricted securities," as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below.

Subject to the lock-up agreements described below and the provisions of Rules 144 and 701 under the Securities Act, these restricted securities will be available for sale in the public market as follows:

   
Date
  Number of shares
 
   

On the date of this prospectus

     

Between 90 and 180 days after the date of this prospectus

     

At various times beginning more than 180 days after the date of this prospectus

       
   

The above table assumes the automatic conversion of all outstanding shares of our convertible preferred stock effective immediately prior to the completion of this offering and excludes 240,446 shares of our common stock issued in connection with the early exercise of options which are subject to our right of repurchase. In addition, of the 11,813,977 shares of our common stock that were subject to stock options outstanding as of October 31, 2014, options to purchase an aggregate of 2,342,125 shares of common stock were vested as of October 31, 2014 and will be eligible for sale at various times beginning more than 180 days following the effective date of this offering.

Rule 144

In general, under Rule 144, beginning 90 days after the date of this prospectus, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months will be entitled to sell any shares of our common stock that such person has beneficially owned for at least six months, including the holding period of any prior owner other than one of our affiliates, without regard to volume limitations. Sales of our common stock by any such person would be subject to the availability of current public information about us if the shares to be sold were beneficially owned by such person for less than one year.

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In addition, under Rule 144, a person may sell shares of our common stock acquired from us immediately upon the completion of this offering, without regard to volume limitations or the availability of public information about us, if:

the person is not our affiliate and has not been our affiliate at any time during the preceding three months; and the person has beneficially owned the shares to be sold for at least six months, including the holding period of any prior owner other than one of our affiliates.

Beginning 90 days after the date of this prospectus, our affiliates who have beneficially owned shares of our common stock for at least six months, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

1% of the number of shares of our common stock then-outstanding, which will equal approximately                    shares immediately after this offering;

this offering; and the average weekly trading volume in our common stock during the four calendar weeks preceding the date of filing of a Notice of Proposed Sale of Securities Pursuant to Rule 144 with respect to the sale.

Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

In general, under Rule 701, any of our employees, consultants or advisors who purchase shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of this offering that was completed in reliance on Rule 701 and complied with the requirements of Rule 701 will, subject to the lock-up restrictions described below, be eligible to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.

Lock-up agreements

In connection with this offering we and our officers, directors and substantially all of our equity holders have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of our common stock or securities convertible into or exchangeable for shares of common stock, file or cause to be filed a registration statement covering shares of common stock or any securities that are convertible into, exchangeable for, or represent the right to receive, common stock or any substantially similar securities, or publicly disclose the intention to do any of the foregoing, during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of J.P. Morgan Securities LLC. These agreements do not apply to the issuance by us of shares under any existing employee benefit plans.

Registration rights

Upon completion of this offering, certain holders of our outstanding preferred stock will be entitled to various rights with respect to the registration under the Securities Act of shares of our common stock issuable upon conversion of our preferred stock. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act

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immediately upon the effectiveness of the registration. See "Description of Capital Stock—Investors' Rights Agreement" for additional information.

Registration statement

We intend to file a registration statement on Form S-8 under the Securities Act covering all of the shares of common stock subject to options outstanding or reserved for issuance under our stock plans. We expect to file this registration statement as soon as practicable after this offering. However, none of the shares registered on Form S-8 will be eligible for resale until the expiration of the lock-up agreements to which they are subject.

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Underwriting

We are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC is the sole book-running manager of the offering and representative of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

 
Name
  Number of
shares

 

J.P. Morgan Securities LLC

   

Cowen and Company, LLC

   

Leerink Partners LLC

   

   

   
     

Total

   
 

The underwriters are committed to purchase all the common shares offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the common shares directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $              per share. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

The underwriters have an option to buy up to                           additional shares of common stock from us. The underwriters have 30 days from the date of this prospectus to exercise this option. If any shares are purchased with this option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $               per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.

   
 
  Without
option to
purchase
additional shares
exercise

  With full
option to
purchase
additional shares
exercise

 
   

Per Share

  $     $    

Total

  $     $    
   

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We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $              . We have agreed to reimburse the underwriters for all expenses relating to the clearance of this offering with the Financial Industry Regulatory Authority, Inc.

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We have agreed that we will not (1) 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, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise, without the prior written consent of J.P. Morgan Securities LLC for a period of 180 days after the date of this prospectus, other than the shares of our common stock to be sold hereunder and any shares of our common stock issued upon the exercise of options granted under our existing equity incentive plans.

Our directors and executive officers, and substantially all of our securityholders have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities LLC, (1) 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 our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, or other securityholders in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), or publicly disclose the intention to make any offer, sale pledge or disposition, or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise, or (3) make any demand for or exercise any right with respect to the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

We have applied to have our common stock approved for listing on the New York Stock Exchange under the symbol "NVTA."

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In connection with this offering, the underwriters may engage in stabilizing transactions, which involve making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involve the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' option to purchase additional shares referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act of 1933, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discounts and commissions received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the NYSE, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors, including:

the information set forth in this prospectus and otherwise available to the representatives;

our prospects and the history and prospects for the industry in which we compete;

an assessment of our management;

our prospects for future earnings;

the general condition of the securities markets at the time of this offering;

the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

other factors deemed relevant by the underwriters and us.

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Neither we nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

Selling restrictions

General

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

United Kingdom

This document is only being distributed to and is only directed at (1) persons who are outside the United Kingdom or (2) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order, or (3) high net worth entities, and other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or each, a 'Relevant Member State, from and including the date on which the European Union Prospectus Directive, or the EU Prospectus Directive, was implemented in that Relevant Member State, or the Relevant Implementation Date, an offer of securities described in this prospectus may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that, with effect from

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and including the Relevant Implementation Date, an offer of securities described in this prospectus may be made to the public in that Relevant Member State at any time:

to any legal entity which is a qualified investor as defined under the EU Prospectus Directive;

to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive); or

in any other circumstances falling within Article 3(2) of the EU Prospectus Directive, provided that no such offer of securities described in this prospectus shall result in a requirement for the publication by us of a prospectus pursuant to Article 3 of the EU Prospectus Directive.

For the purposes of this provision, the expression an "offer of securities to the public" in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State. The expression "EU Prospectus Directive" means Directive 2003/71/EC (and any amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State, and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to the offering, the Company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or the CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Hong Kong

The shares may not be offered or sold by means of any document other than (1) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (2) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (3) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public

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in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (2) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Japan

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan, or the Financial Instruments and Exchange Law, and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

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Legal matters

The validity of the shares of common stock offered hereby will be passed upon for us by Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California. Cooley LLP, San Diego, California is representing the underwriters in this offering.


Experts

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements at December 31, 2012 and 2013, and for each of the two years in the period ended December 31, 2013, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing.


Where you can find additional information

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto. Upon completion of this offering, we will be required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Exchange Act. You may read and copy this information at the Public Reference Room of the SEC, 100 F Street, N.E., Room 1580, Washington D.C. 20549. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov.

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Invitae Corporation

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Table of Contents

Report of independent registered public accounting firm

The Board of Directors and Stockholders
Invitae Corporation

We have audited the accompanying consolidated balance sheets of Invitae Corporation (the Company) as of December 31, 2012 and 2013, and the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders' deficit, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Invitae Corporation at December 31, 2012 and 2013, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP
Redwood City, California
November 6, 2014

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Invitae Corporation
Consolidated balance sheets

   
 
  December 31,  
(In thousands, except share and per share amounts)
  2012
  2013
 
   

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 21,801   $ 43,070  

Prepaid expenses and other current assets

    373     736  
       

Total current assets

    22,174     43,806  

Property and equipment, net

    2,730     8,164  

Restricted cash

    60     120  

Other assets

    1,009     1,013  
       

Total assets

  $ 25,973   $ 53,103  
       

Liabilities, convertible preferred stock, and stockholders' deficit

   
 
   
 
 

Current liabilities:

             

Accounts payable

  $ 383   $ 498  

Accrued liabilities

    290     886  

Capital lease obligation, current portion

    458     845  
       

Total current liabilities

    1,131     2,229  

Capital lease obligation, net of current portion

    757     1,156  

Other long-term liabilities

    68     393  

Liabilities related to early exercise of stock options

    21     31  
       

Total liabilities

    1,977     3,809  
       

Commitments and contingencies (Note 5)

   
 
   
 
 

Convertible preferred stock, $0.0001 par value; 46,987,767 and 81,131,537 shares authorized, 46,987,747 and 81,131,524 shares issued and outstanding as of December 31, 2012 and December 31, 2013, respectively; aggregate liquidation value of $37,002 and $87,002 as of December 31,2012 and December 31, 2013, respectively

   
36,755
   
86,574
 

Stockholders' deficit:

             

Common stock, $0.0001 par value; 60,987,767 and 98,131,537 shares authorized, 3,966,715 and 4,396,033 shares issued and outstanding as of December 31, 2012 and December 31, 2013, respectively

         

Additional paid-in capital

    91     408  

Accumulated deficit

    (12,850 )   (37,688 )
       

Total stockholders' deficit

    (12,759 )   (37,280 )
       

Total liabilities, convertible preferred stock, and stockholders' deficit

  $ 25,973   $ 53,103  
   

   

The accompanying notes are an integral part of these financial statements.

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Invitae Corporation
Consolidated statements of operations and comprehensive loss

   
 
  Year ended December 31,  
(In thousands, except share and per share amounts)
  2012
  2013
 
   

Revenue

  $   $ 148  

Costs and operating expenses:

             

Cost of revenue

        667  

Research and development

    5,557     16,039  

Selling and marketing

        2,431  

General and administrative

    3,004     5,764  
       

Total costs and operating expenses

    8,561     24,901  
       

Loss from operations

    (8,561 )   (24,753 )

Other income (expense), net

    2     (26 )

Interest expense

    (43 )   (59 )
       

Net loss and comprehensive loss

  $ (8,602 ) $ (24,838 )
       

Net loss attributable to common stockholders

  $ (9,014 ) $ (24,989 )
       

Net loss per share attributable to common stockholders, basic and diluted

  $ (2.36 ) $ (6.02 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted

    3,814,255     4,150,519  
       

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)

        $ (0.41 )
             

Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)

          60,977,738  
   

   

The accompanying notes are an integral part of these financial statements.

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Invitae Corporation
Consolidated statements of convertible preferred stock and stockholders' deficit

   
 
  Convertible
preferred stock
   
   
   
   
   
 
 
  Common stock   Additional
paid-in
capital

   
  Total
stockholders'
deficit

 
(In thousands, except share and per share amounts)
  Accumulated
deficit

 
  Shares
  Amount
  Shares
  Amount
 
   

Balance as of January 1, 2012

    15,874,997   $ 7,362     3,681,884   $   $ 9   $ (4,248 ) $ (4,239 )

Issuance of Series C convertible preferred stock for cash and the conversion of convertible notes at $0.95 per share, net of issuance costs of $164

    31,112,750     29,393                      

Common stock issued on exercise of stock options

            125,193         8         8  

Vesting of common stock related to early exercise of options

            159,638         9         9  

Stock-based compensation expense

                    65         65  

Net loss

                        (8,602 )   (8,602 )
       

Balance as of December 31, 2012

    46,987,747     36,755     3,966,715         91     (12,850 )   (12,759 )

Issuance of Series D convertible preferred stock for cash at $1.25 per share, net of issuance costs of $67

    8,000,000     9,933                      

Issuance of Series E convertible preferred stock for cash at $1.53 per share, net of issuance costs of $114

    26,143,777     39,886                      

Common stock issued on exercise of stock options

            190,000         39         39  

Vesting of common stock related to early exercise of options

            239,318         18         18  

Stock-based compensation expense

                    260         260  

Net loss

                        (24,838 )   (24,838 )
       

Balance as of December 31, 2013

    81,131,524   $ 86,574     4,396,033   $   $ 408   $ (37,688 ) $ (37,280 )
   

   

The accompanying notes are an integral part of these financial statements.

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Invitae Corporation
Consolidated statements of cash flows

   
 
  Year ended December 31,  
(In thousands)
  2012
  2013
 
   

Cash flows from operating activities

             

Net loss

  $ (8,602 ) $ (24,838 )

Adjustments to reconcile net loss to net cash used in operating activities:

             

Depreciation and amortization

    277     928  

Stock-based compensation

    65     260  

Changes in operating assets and liabilities:

             

Prepaid expenses and other current assets

    (303 )   (363 )

Other assets

    (992 )   (4 )

Accounts payable

    174     220  

Accrued expenses and other liabilities

    227     767  
       

Net cash used in operating activities

    (9,154 )   (23,030 )
       

Cash flows from investing activities

   
 
   
 
 

Purchases of property and equipment

    (766 )   (4,520 )

Change in restricted cash

    (60 )   (60 )
       

Net cash used in investing activities

    (826 )   (4,580 )
       

Cash flows from financing activities

   
 
   
 
 

Capital lease principal payment

    (609 )   (1,007 )

Proceeds from issuance of convertible notes

    2,000      

Proceeds from issuance of common stock upon exercise of stock options

    18     67  

Proceeds from issuance of convertible preferred stock, net of issuance costs

    27,393     49,819  
       

Net cash provided by financing activities

    28,802     48,879  
       

Net increase in cash and cash equivalents

    18,822     21,269  

Cash and cash equivalents at beginning of period

    2,979     21,801  
       

Cash and cash equivalents at end of period

  $ 21,801   $ 43,070  
       

Supplemental cash flow information:

   
 
   
 
 

Interest paid

  $ 29   $ 56  
       

Supplemental cash flow information of non-cash investing and financing activities:

   
 
   
 
 

Equipment acquired through capital leases

  $ 1,539   $ 1,793  
       

Conversion of convertible notes and accrued interest into Series C convertible preferred stock

  $ 2,018      

Purchase of property and equipment in accounts payable and accrued liabilities. 

  $ 64   $ 49  
   

   

The accompanying notes are an integral part of these financial statements.

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Invitae Corporation
Notes to consolidated financial statements

1.     Organization and description of business

Invitae Corporation (the "Company") was incorporated in the state of Delaware on January 13, 2010, as Locus Development, Inc. and changed its name to Invitae Corporation in 2012. The Company utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for physicians and their patients. The Company has two laboratories: one in San Francisco, California and a second in Santiago, Chile. The Company's first product is an assay of 216 genes that can be used for multiple indications. The test includes multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders and other hereditary conditions. The Company operates in one segment.

Need for additional capital

The Company has incurred net losses from operations since inception and has an accumulated deficit of $37.7 million as of December 31, 2013. The Company expects to incur additional losses and negative operating cash flows and, as a result, it will require additional capital to fund its operations and execute its business plan. Management plans to finance its operations in the future with additional equity financing arrangements. In August and October 2014, the Company issued an aggregate of 60,000,000 shares of Series F convertible preferred stock for $120.0 million in gross proceeds (see Note 12). Management believes that its cash and cash equivalents, including the proceeds from the sale of the Company's Series F convertible preferred stock, will provide sufficient funds to enable the Company to meet its operating plan for at least the next 12 months. However, if the Company's anticipated operating results are not achieved in future periods, management believes that planned expenditures may need to be reduced in order to extend the time period over which the then-available resources would be able to fund the Company's operations.

2.     Summary of significant accounting policies

Principles of consolidation

The Company's consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition; the recoverability of long-lived assets; the fair value of the Company's common stock; stock-based compensation expense; and income tax uncertainties. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those estimates and assumptions.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

Concentrations of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company's cash and cash equivalents are held by financial institutions in the United States and Chile. Such deposits may exceed federally insured limits.

As of December 31, 2013, substantially all of the Company's revenue has been derived from sales of its assay of 216 genes. Teva Pharmaceuticals Industries Ltd. accounted for 44% of the Company's revenue for the year ended December 31, 2013. For the year ended December 31, 2013, no other customer represented over 10% of total revenue.

Cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.

Restricted cash

Restricted cash consists of a money market account that serves as collateral for a credit card agreement at one of the Company's financial institutions.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between three and seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease. Amortization expense of assets acquired through capital leases is included in depreciation and amortization expense in the consolidated statements of operations and comprehensive loss. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations and comprehensive loss in the period realized.

The useful lives of the property and equipment are as follows:

 

Furniture and fixtures

  7 years

Automobiles

  7 years

Laboratory equipment

  5 years

Computer equipment

  3 years

Software

  3 years

Leasehold improvements

  Shorter of lease term or estimated useful life
 

Internal-use software

The Company capitalizes third-party costs incurred in the application development stage to design and implement the software used in its tests and Invitae Family History Tool mobile application. Costs incurred in the application development stage of the software and mobile application are capitalized and will be amortized over an estimated useful life of three years on a straight line basis.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

During the years ended December 31, 2012 and 2013, the Company capitalized $0 and $250,000, respectively, of software development costs. The $250,000 was recorded in property and equipment as construction-in-progress as of December 31, 2013 as it had not been completed and placed into service.

Long-lived assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value. The Company has not recorded an impairment of any long-lived assets as of December 31, 2013.

Fair value of financial instruments

Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

Revenue recognition

Revenue is generated from the sale of tests that provide analysis and associated interpretation of the sequencing of parts of the genome. Revenue associated with subsequent re-requisition services was de minimis for 2013.

Revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management's judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payer's individual payment patterns. The Company reviews the number of tests paid against the number of tests billed and the payer's outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. The Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received.

Cost of revenue

Cost of revenue reflects the aggregate costs incurred in delivering the genetic testing results to physicians and includes expenses for personnel costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing the Company's test are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test.

Research and development

Research and development costs are charged to operations as incurred. Research and development costs include, but are not limited to, payroll and personnel-related expenses, stock-based compensation expense, reagents and laboratory supplies, consulting costs, and allocated overhead including rent, information technology, equipment depreciation and utilities.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

Income taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Stock-based compensation

The Company measures its stock-based payment awards made to employees and directors based on the estimated fair values of the awards and recognizes the compensation expense over the requisite service period. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock-based awards. Stock-based compensation expense is recognized using the straight-line method. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company's stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company accounts for compensation expense related to stock options granted to non-employees based on the fair values estimated using the Black-Scholes model. Stock options granted to non-employees are remeasured at each reporting date until the award is vested.

Foreign currency transactions

The Company uses the U.S. dollar as its functional currency for its subsidiary in Chile. Foreign currency assets and liabilities are remeasured into U.S. dollars using the end of period exchange rates except for nonmonetary assets and liabilities, which are remeasured using historical exchange rates. Expenses are remeasured using an average exchange rate for the respective period. Gains or losses from foreign currency transactions are included in other income on the consolidated statements of operations and comprehensive loss. Foreign currency transaction gains and losses have not been significant to the consolidated financial statements for all periods presented.

Comprehensive loss

Comprehensive loss is composed of two components: net loss and other comprehensive loss. Other comprehensive loss refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders' deficit, but are excluded from net loss. The Company did not record any transactions within other comprehensive loss in the periods presented and, therefore, net loss and comprehensive loss were the same for all periods presented.

Net loss per share attributable to common stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. Potentially dilutive securities consisting of convertible preferred stock and options to purchase common stock are considered to be common stock equivalents and were excluded from the

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Invitae Corporation
Notes to consolidated financial statements (Continued)

calculation of diluted net loss per share attributable to common stockholders because their effect would be antidilutive for all periods presented. Common shares subject to repurchase are excluded from the weighted-average shares. For the year ended December 31, 2012 and 2013, 350,228 and 326,465 shares subject to repurchase, respectively, are excluded from basic loss per share calculation.

Unaudited pro forma net loss per share attributable to common stockholders

In contemplation of an initial public offering, the Company has presented the unaudited pro forma basic and diluted net loss per share attributable to common stockholders which has been computed to give effect to the conversion of its convertible preferred stock into common stock.

Recent accounting pronouncements

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation ("ASU 2014-10"). ASU 2014-10 simplifies the accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments related to the elimination of the inception-to-date information and other disclosure requirements of Topic 915 should be applied retrospectively, and are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. The Company early adopted this guidance as of January 1, 2012, and accordingly, there is no inception-to-date information presented in these consolidated financial statements.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

3.     Balance sheet components

Property and equipment, net

Property and equipment consisted of the following (in thousands):

   
 
  December 31,  
 
  2012
  2013
 
   

Leasehold improvements

  $ 248   $ 1,527  

Laboratory equipment

    789     3,567  

Equipment under capital lease

    1,942     3,735  

Computer equipment

        120  

Software

        18  

Furniture and fixtures

        21  

Automobiles

        16  

Construction-in-process

    73     410  
       

Total property and equipment, gross

    3,052     9,414  

Accumulated depreciation and amortization

    (322 )   (1,250 )
       

Total property and equipment, net

  $ 2,730   $ 8,164  
   

Depreciation and amortization expense was $277,000 and $928,000 for the years ended December 31, 2012 and 2013, respectively.

Accrued liabilities

Accrued liabilities consisted of the following (in thousands):

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

Accrued compensation and related expenses

  $ 139   $ 279  

Accrued professional services

    114     201  

Accrued costs for construction-in-process

        168  

Other

    37     238  
       

Total accrued liabilities

  $ 290   $ 886  
   

4.    Fair value measurements

Financial assets and liabilities are recorded at fair value. The carrying amounts of certain of the Company's financial instruments, including cash equivalents, and accounts payable, are valued at cost, which approximates fair value due to their short maturities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The authoritative guidance establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

    Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

    Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.

    Level 3—Unobservable inputs that reflect the reporting entity's own assumptions.

The Company's financial instruments consist only of Level 1 assets, which are highly liquid money market funds. At December 31, 2012 and 2013, the Company had $21.4 million and $33.2 million in money market funds that are included in cash and cash equivalents on the consolidated balance sheets.

5.     Commitments and contingencies

Convertible Notes

The Company entered into a Note Purchase Agreement dated May 22, 2012, as amended June 27, 2012 and July 26, 2012 with investors and issued notes in the aggregate principal amount of $2.0 million. The convertible notes had a maturity date of November 1, 2012 and an annual interest rate of 8.0%. In August 2012, the outstanding principal $2.0 million and accrued interest of $18,000 were converted into Series C convertible preferred stock at the price paid by other purchasers for the Series C convertible preferred stock.

Operating leases

The Company entered into a lease agreement beginning September 1, 2011, for its headquarters and laboratory facilities in San Francisco, California. The lease term is for 60 months. The Company also entered into a lease agreement beginning November 1, 2012, for office space in Palo Alto, California. The lease term for this facility is for 84 months and provides tenant improvement allowances of up to $334,000. The Company provided a security deposit of $993,000 as collateral for the lease which is included in other assets in the Company's balance sheet. On May 1, 2013, the Company entered into a lease agreement for lab space in Santiago, Chile with a lease term of two years with an automatic two-year renewal option. On December 15, 2013, the Company entered into an additional lease for office space and laboratory facilities in San Francisco, California. The lease term is for 38 months. The master lease agreements include scheduled rent increases over the terms of the leases. Rent increases, including the impact of a rent holiday and a leasehold improvement allowance from the landlord, were recognized as deferred rent and are amortized on a straight-line basis over the term of the original lease.

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Table of Contents

Future minimum lease payments under non-cancellable operating leases as of December 31, 2013 are as follows (in thousands):

   
Year ending December 31,
  Amounts
 
   

2014

  $ 1,568  

2015

    1,796  

2016

    1,798  

2017

    920  

2018

    770  

Thereafter

    991  
       

Total minimum lease payments

  $ 7,843  
   

Rent expense was $177,000 and $807,000 and for the years ended December 31, 2012 and 2013, respectively.

Capital leases

The Company has entered into various capital lease agreements to obtain lab equipment. The original term of the capital leases is typically three years with interest rates ranging from 3.5%—18.9%. The leases are secured by the underlying equipment. The portion of the future payments designated as principal repayment was classified as a capital lease obligation on the consolidated balance sheets. Future payments under the capital lease as of December 31, 2013 are as follows (in thousands):

   
Year ending December 31,
  Amounts
 
   

2014

  $ 906  

2015

    797  

2016

    370  

2017

    29  
       

Total capital lease obligation

    2,102  

Less: amount representing interest

    (101 )
       

Present value of net minimum capital lease payments

    2,001  

Less: current portion

    (845 )
       

Total noncurrent capital lease obligation

  $ 1,156  
   

Interest expense related to capital leases was $25,000 and $59,000 and for the years ended December 31, 2012 and 2013, respectively.

Property and equipment under capital leases amounted to $1.9 million and $3.7 million as of December 31, 2012 and 2013, respectively. Accumulated depreciation and amortization, collectively, on these assets was $170,000 and $625,000, respectively.

Guarantees and indemnifications

As permitted under Delaware law and in accordance with the Company's bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of the risk associated with the Company's exposure and may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the

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Company has not recorded any liabilities associated with these indemnification agreements as of December 31, 2012 or 2013.

Contingencies

On November 25, 2013, the University of Utah Research Foundation, the Trustees of the University of Pennsylvania, HSC Research and Development Limited Partnership, Endorecherche, Inc. and Myriad Genetics, Inc. (collectively, the Myriad Plaintiffs) filed a complaint in the District of Utah (the Utah Action), alleging that certain of the Company's genetic testing services infringe certain claims of various U.S. Patents (collectively, the Myriad Patents). On November 26, 2013, the Company filed a complaint for declaratory judgment in the Northern District of California (the California Action), asserting that the Myriad Patents are invalid and the Company does not infringe them, and the Myriad Plaintiffs have counterclaimed alleging that the Company infringes the Myriad Patents. Although the Utah Action has been dismissed, on February 19, 2014, the Joint Panel on Multidistrict Litigation granted the Myriad Plaintiffs' motion to consolidate for pre-trial proceedings all actions concerning the Myriad Patents (the MDL Proceedings), with the MDL Proceedings taking place in the District of Utah. Upon the conclusion of the MDL Proceedings, any remaining aspects of the California Action would be transferred back to the Northern District of California for further proceedings, if needed. The Company intends to continue to pursue this matter and defend itself vigorously. Because of the uncertainties related to the legal proceedings, the Company is not able to predict or estimate any range of reasonably possible loss related to the Myriad matters. Accordingly, the Company has not accrued for contingent liabilities associated with the legal matters described above. In the event of a successful claim of infringement or misappropriation against the Company, it may be required to pay damages and obtain one or more licenses from third parties, or be prohibited from commercializing certain tests, all of which could have a material adverse impact on the Company's cash position and business and financial condition.

The Company may become party to various other claims and complaints arising in the ordinary course of business. Management does not believe that any ultimate liability resulting from any of these claims will have a material adverse effect on its results of operations, financial condition, or liquidity. However, management cannot give any assurance regarding the ultimate outcome of these claims, and their resolution could be material to operating results for any particular period, depending upon the level of income for the period.

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6.     Convertible preferred stock

Convertible preferred stock as of December 31, 2012 and 2013 consists of the following (in thousands, except share and per share data):

   
 
  Shares
authorized

  Original
issue price

  Shares
issued and
outstanding

  Aggregate
liquidation
amount

  Proceeds,
net of
issuance
costs

 
   

Series A

    11,693,179   $ 0.44     11,693,179   $ 5,145   $ 5,109  

Series B

    4,181,818     0.55     4,181,818     2,300     2,253  

Series C

    31,112,770     0.95     31,112,750     29,557     29,393  
                 

Balance at December 31, 2012

    46,987,767           46,987,747   $ 37,002   $ 36,755  
                 

Series A

   
11,693,179
 
$

0.44
   
11,693,179
 
$

5,145
 
$

5,109
 

Series B

    4,181,818     0.55     4,181,818     2,300     2,253  

Series C

    31,112,750     0.95     31,112,750     29,557     29,393  

Series D

    8,000,000     1.25     8,000,000     10,000     9,933  

Series E

    26,143,790     1.53     26,143,777     40,000     39,886  
                 

Balance at December 31, 2013

    81,131,537           81,131,524   $ 87,002   $ 86,574  
   

The rights, preferences and privileges of the Series A, Series B, Series C, Series D and Series E convertible preferred stock are as follows:

Dividends

The holders of the outstanding shares of Series B, Series C, Series D and Series E convertible preferred stock are entitled to receive, when and if declared by the Board of Directors, a non-cumulative cash dividend at the rate of $0.044, $0.076, $0.10 and $0.1224 per share per annum, respectively. Such dividends are payable in preference to any dividends on common stock declared by the Board of Directors. The holders of the outstanding shares of Series A convertible preferred stock are entitled to receive, when and if declared by the Board of Directors, the amount of any dividend paid on any other shares of capital stock (including shares of Series B, Series C, Series D and Series E convertible preferred stock). Such dividends are payable in preference to any dividends on common stock and pari passu with any dividends on Series B, Series C, Series D and Series E convertible preferred stock, except that an amount equal on average to $0.0895 per share of Series A convertible preferred stock would, if a dividend is declared by the Board of Directors, be payable in preference to any dividends on Series B, Series C, Series D and Series E convertible preferred stock. No dividends have been declared to date.

Conversion rights

Each share of Series A, Series B, Series C, Series D and Series E convertible preferred stock is, at the option of the holder, convertible into the number of fully paid and non-assessable shares of common stock as determined by dividing the original issue price applicable to such convertible preferred stock by the conversion price in effect at that time. The conversion price for each series of convertible preferred stock shall initially be the original issue price of such series of preferred stock and shall be adjusted in accordance with conversion provisions contained in the Company's Amended and Restated Certificate of Incorporation. All series of convertible preferred stock are currently convertible into common stock on a 1-for-1 basis.

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Each share of convertible preferred stock will be automatically converted into shares of common stock based on the then effective conversion price (i) upon the affirmative election of the holders of at least a majority of the outstanding shares of the convertible preferred stock or (ii) immediately upon the closing of a firmly underwritten public offering filed under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company at a price of at least $3.00 per share (subject to adjustment in the event of any stock split) and in which the gross proceeds to the Company are at least $30.0 million.

Voting rights

Each holder is entitled to the number of votes equal to the number of shares of common stock into which the shares of preferred stock could be converted.

Liquidation rights

Upon liquidation, dissolution, or winding up of the Company, the holders of the convertible preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of shares of common stock, an amount equal to the per share issue price of such series of preferred stock ($0.44 per share for Series A convertible preferred stock, $0.55 per share for Series B convertible preferred stock, $0.95 per share for Series C convertible preferred stock, $1.25 per share for Series D convertible preferred stock, and $1.53 per share for Series E convertible preferred stock), plus all declared and unpaid dividends on such shares and, in the instance of Series A convertible preferred stock, an additional amount equal on average to $0.0895 per share (the "liquidation preference"). If available assets are insufficient to pay the full liquidation preference, the available assets will be distributed among the holders of the convertible preferred stock, on a pari passu and pro rata basis. After the payment of the liquidation preference, all remaining assets available for distribution will be distributed ratably among the holders of the common stock.

Other

The convertible preferred stock is recorded at fair value on the dates of issuance, net of issuance costs. The Company classifies the convertible preferred stock outside of stockholders' equity because the shares contain liquidation features that are not solely within its control. During the years ended December 31, 2012 and 2013, the Company did not adjust the carrying values of the convertible preferred stock to the deemed redemption values of such shares since a liquidation event was not probable. Subsequent adjustments to increase the carrying values to the ultimate redemption values will be made only when it becomes probable that such a liquidation event will occur.

7.     Stockholders' deficit

Common stock

The holders of each share of common stock have one vote for each share of stock. The common stockholders are also entitled to receive dividends whenever funds and assets are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all series of convertible preferred stock outstanding.

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As of December 31, 2012 and 2013, the Company had reserved shares of common stock, on an as-if converted basis, for issuance as follows:

   
 
  As of December 31,  
 
  2012
  2013
 
   

Conversion of Series A convertible preferred stock

    11,693,179     11,693,179  

Conversion of Series B convertible preferred stock

    4,181,818     4,181,818  

Conversion of Series C convertible preferred stock

    31,112,750     31,112,750  

Conversion of Series D convertible preferred stock

        8,000,000  

Conversion of Series E convertible preferred stock

        26,143,777  

Options issued and outstanding

    4,517,934     7,038,380  

Options available for grant under stock option plan

    4,810,957     5,239,124  
       

Total

    56,316,638     93,409,028  
   

8.     Stock incentive plan

2010 Stock incentive plan

In 2010, the Company adopted the 2010 Incentive Plan (the "Plan"). The Plan provides for the granting of stock-based awards to employees, directors, and consultants under terms and provisions established by the Board of Directors. Under the terms of the Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Board of Directors. The terms of options granted under the Plan may not exceed ten years.

Options granted generally vest over a period of four years. Typically, the vesting schedule for options granted to newly hired employees provides that 1/4 of the grant vests upon the first anniversary of the employee's date of hire, with the remainder of the shares vesting monthly thereafter at a rate of 1/48 of the total shares subject to the option. All other options typically vest in equal monthly installments over the four-year vesting schedule.

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Activity under the Plan is set forth below (in thousands, except share and per share amounts and years):

   
 
  Shares
available
for grant

  Stock
options
outstanding

  Weighted-
average
exercise
price

  Weighted-average
remaining
contractual life
(years)

  Aggregate
intrinsic value

 
   

Balances at January 1, 2012

    1,983,135   355,657   $ 0.05   9.07   $ 3  

Additional options authorized

    7,236,364                    

Granted

    (4,726,121 ) 4,726,121     0.16            

Cancelled

    317,579   (317,579)     0.07            

Exercised

      (246,265)     0.06            
                       

Balances at December 31, 2012

    4,810,957   4,517,934     0.17   9.61   $ 196  

Additional options authorized

    3,354,167                  

Granted

    (3,037,000 ) 3,037,000     0.40            

Cancelled

    111,000   (111,000)     0.27            

Exercised

      (405,554)     0.32            
                       

Balances at December 31, 2013

    5,239,124   7,038,380   $ 0.26   9.00   $ 2,155  
                       

Options exercisable at December 31, 2013

        1,779,113   $ 0.15   8.47   $ 744  
                             

Options vested and expected to vest at December 31, 2013

        6,847,477   $ 0.26   8.99   $ 2,107  
   

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company's common stock for stock options that were in-the-money.

The weighted-average fair value of options to purchase common stock granted was $0.12 and $0.30 per share in the years ended December 31, 2012 and 2013, respectively.

The fair value of options to purchase common stock vested was $34,000 and $204,000 in the years ended December 31, 2012 and 2013.

The intrinsic value of options to purchase common stock exercised was $0 and $60,000 in the years ended December 31, 2012 and 2013, respectively.

Early exercise of stock options

The Plan allows for the granting of options that may be exercised before the options have vested. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser's employment or services, at the price paid by the purchaser, and are not deemed to be issued for accounting purposes until those related shares vest. The amounts received in exchange for these shares have been recorded as a liability on the accompanying balance sheets and will be reclassified into common stock and additional paid-in-capital as the shares vest. The Company's right to repurchase these shares generally lapses 1/4 after a one-year cliff then at a monthly rate of 1/48 thereafter.

At December 31, 2012 and 2013, there were 350,228 and 326,465 shares of common stock outstanding, respectively, subject to the Company's right of repurchase at prices ranging from $0.05 to $0.21 per share. At December 31, 2012 and 2013, the Company recorded $21,000 and $31,000, respectively, as liabilities associated with shares issued with repurchase rights.

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Stock-based compensation

The Company uses the grant date fair value of its common stock to value both employee and non-employee options when granted. The Company revalues non-employee options each reporting period using the fair market value of the Company's common stock as of the last day of each reporting period.

In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and its determination generally requires significant judgment.

Expected term—The expected term represents the period that the Company's stock-based awards are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term).

Expected volatility—Because the Company is privately held and does not have any trading history for its common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants. When selecting comparable publicly traded companies in a similar industry on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies' common stock during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Dividend yield—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

The fair value of share-based payments for option granted to employees and directors was estimated on the date of grant using the Black-Scholes option-pricing valuation model based on the following assumptions:

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

Expected term (in years)

    6.02     6.03  

Expected volatility

    88.63–89.18%     88.54–94.52%  

Risk-free interest rate

    0.82–1.28%     0.99–1.97%  

Dividend yield

         
   

Stock-based compensation related to stock options granted to non-employees is recognized as the stock options are earned. The fair value of the stock options granted is calculated at each reporting date using the Black-Scholes option pricing model with the following assumptions: expected life is equal to the remaining contractual term of the award as of the measurement date ranging from 8.19 years to 10.00 years as of December 31, 2012, and 9.25 years to 9.60 years as of December 31, 2013, respectively; risk free rate is based on the U.S. Treasury Constant Maturity rate with a term similar to the expected life of the option at the measurement date; expected dividend yield of 0%; and volatilities ranging from 88.54% to 89.01% as of December 31, 2012, and 88.54% as of December 31, 2013, respectively.

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The following table summarizes stock-based compensation expense related to stock options for the years ended December 31, 2012 and 2013 included in the statements of operations and comprehensive loss as follows (in thousands):

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

Cost of revenue

  $   $ 11  

Research and development

    46     165  

Selling and marketing

        42  

General and administrative

    19     42  
       

Total stock-based compensation expense

  $ 65   $ 260  
   

If all of the remaining non-vested and outstanding stock option awards that have been granted vested, the Company would recognize approximately $1.2 million in compensation expense over a weighted-average remaining period of 3.25 years.

9.     Income taxes

The Company did not record a provision or benefit for income taxes during the years ended December 31, 2012 and 2013. The components of loss before income taxes by U.S. and foreign jurisdictions are as follows (in thousands):

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

United States

  $ 8,602   $ 23,522  

Foreign

        1,316  
       

Total

  $ 8,602   $ 24,838  
   

The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the Company's tax expense for the periods presented:

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

U.S. federal taxes at statutory rate

    34.0%     34.0%  

State taxes (net of federal benefit)

    5.8     0.9  

Non-deductible expenses

    (0.6 )   (0.4 )

Foreign tax differential

        (1.8 )

Change in valuation allowance

    (39.2 )   (32.7 )
       

Total

    0.0%     0.0%  
   

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The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):

   
 
  As of December 31,  
 
  2012
  2013
 
   

Deferred tax assets:

             

Net operating loss carryforwards

  $ 5,084   $ 13,624  

Tax credits

    31     31  

Accruals and other

    40     115  
       

Gross deferred tax assets

    5,155     13,770  

Valuation allowance

    (4,991 )   (13,413 )
       

Net deferred tax assets

    164     357  

Deferred tax liabilities:

             

Property and equipment

  $ (164 ) $ (357 )
       

Total deferred tax liabilities

    (164 )   (357 )
       

Net deferred tax assets

  $   $  
   

The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding realization of such assets. The valuation allowance increased by $3.4 million and $8.4 million during the years ended December 31, 2012 and 2013, respectively.

As of December 31, 2013, the Company had net operating loss carryforwards of approximately $36.6 million and $16.8 million available to reduce future taxable income, if any, for Federal and California state income tax purposes, respectively. None of these amounts represents federal and state tax deductions from stock based compensation which will be recorded as an adjustment to additional paid-in capital when they reduce taxes payable. The U.S. federal and California state net operating loss carryforwards will begin to expire in 2030.

As of December 31, 2013, the Company had net operating loss carryforwards for foreign income tax purposes of $1.3 million which have no expiration date.

As of December 31, 2013, the Company had research and development credit carryforwards of approximately $1.2 million and $1.1 million available to reduce its future tax liability, if any, for Federal and California state income tax purposes, respectively. The Federal credit carryforwards begin to expire in 2030. California credit carryforwards have no expiration date. As of December 31, 2013, the Company has other tax credits of $45,000 that have no expiration period for the majority of the credits.

Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. No Section 382 study has been completed as of December 31, 2013.

As of December 31, 2013, the Company had unrecognized tax benefits of $2.1 million, none of which would currently affect the Company's effective tax rate if recognized due to the Company's deferred tax assets being fully offset by a valuation allowance. The Company has not accrued interest and penalties related to the unrecognized tax benefits reflected in the financial statements for the year ended December 31, 2013. Unrecognized tax benefits are not expected to change in the next 12 months.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

Unrecognized tax benefits, beginning of period

  $ 152   $ 618  

Gross increases—current period tax positions

    466     1,482  
       

Unrecognized tax benefits, end of period

  $ 618   $ 2,100  
   

The Company's policy is to include penalties and interest expense related to income taxes as a component of tax expense. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2013.

The Company's major tax jurisdictions are the United States and California. All of the Company's tax years will remain open for examination by the Federal and state tax authorities for three and four years, respectively, from the date of utilization of the net operating loss or research and development credit. The Company does not have any tax audits pending.

10.   Net loss per share attributable to common stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2012 and 2013 (in thousands, except share and per share amounts):

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

Net loss

  $ (8,602 ) $ (24,838 )

Less: dividends on convertible preferred stock

    (412 )   (151 )
       

Net loss attributable to common stockholders

  $ (9,014 ) $ (24,989 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted

    3,814,255     4,150,519  
       

Net loss per share attributable to common stockholders, basic and diluted

  $ (2.36 ) $ (6.02 )
   

The following outstanding shares of common stock equivalents have been excluded from diluted net loss per share attributable to common stockholders for the years ended December 31, 2012 and 2013 because their inclusion would be anti-dilutive:

   
 
  Year ended December 31,  
 
  2012
  2013
 
   

Shares of common stock subject to outstanding options

    4,517,934     7,038,380  

Shares of common stock subject to conversion from preferred stock

    46,987,747     81,131,524  

Shares of common stock subject to unvested early exercise of outstanding options subject to repurchase

    350,228     326,465  
       

Total shares of common stock equivalents

    51,855,909     88,496,369  
   

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The following table sets forth the computation of the Company's unaudited pro forma basic and diluted net loss per share attributable to common stockholders after giving effect to the conversion of all outstanding shares of convertible preferred stock using the as-if converted method into common stock as though the conversion had occurred at the beginning of the year ended December 31, 2013 (in thousands, except share and per share amounts):

   
 
  Year ended
December 31,
2013

 
   
 
  (Unaudited)
 

Net loss

  $ (24,838 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted

    4,150,519  

Pro forma adjustments to reflect assumed conversion of convertible preferred stock

    56,827,218  
       

Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted

    60,977,738  
       

Pro forma net loss per share attributable to common stockholders, basic and diluted

  $ (0.41 )
   

11.   Geographic information

Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for December 31, 2013 (in thousands):

   

United States

  $ 62  

Israel

    65  

Rest of world

    21  
       

Revenue

  $ 148  
   

Long-lived assets (net) by location are summarized as follows (in thousands):

   
 
  December 31,  
 
  2012
  2013
 
   

United States

  $ 2,730   $ 5,934  

Chile

        2,230  
       

Total long-lived assets, net

  $ 2,730   $ 8,164  
   

12.   Subsequent events

Series F convertible preferred stock

In August 2014, the Company issued 24,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate gross proceeds of $49.0 million.

In October 2014, the Company issued 35,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate gross proceeds of $71.0 million.

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Invitae Corporation
Condensed consolidated balance sheets

   
(In thousands, except share and per share amounts)
  December 31,
2013

  June 30,
2014

  Pro forma
stockholders'
equity as of
june 30, 2014

 
   
 
   
  (Unaudited)
  (Unaudited)
 

Assets

                   

Current assets:

                   

Cash and cash equivalents

  $ 43,070   $ 22,039        

Prepaid expenses and other current assets

    736     1,502        
             

Total current assets

    43,806     23,541        

Property and equipment, net

    8,164     9,253        

Restricted cash

    120     150        

Other assets

    1,013     1,204        
             

Total assets

  $ 53,103   $ 34,148        
             

Liabilities, convertible preferred stock, and stockholders' deficit

                   

Current liabilities:

                   

Accounts payable

  $ 498   $ 452        

Accrued liabilities

    886     1,470        

Capital lease obligation, current portion

    845     834        
             

Total current liabilities

    2,229     2,756        

Capital lease obligation, net of current portion

    1,156     764        

Other long term liabilities

    393     417        

Liabilities related to early exercise of stock options

    31     23        
             

Total liabilities

    3,809     3,960        
             

Commitments and contingencies

                   

Convertible preferred stock; $0.0001 par value, 81,131,537 shares authorized as of December 31, 2013 and June 30, 2014 (unaudited); 81,131,524 shares issued and outstanding as of December 31, 2013 and June 30, 2014 (unaudited); no shares authorized, issued and outstanding, pro forma (unaudited); aggregate liquidation value of $87,002 as of December 31, 2013 and June 30, 2014 (unaudited)

   
86,574
   
86,574
 
$

 

Stockholders' deficit:

                   

Common stock, $0.0001 par value; 98,131,537 shares authorized as of December 31, 2013 and June 30, 2014 (unaudited); 4,396,033 and 5,229,662 shares issued and outstanding as of December 31, 2013 and June 30, 2014 (unaudited), respectively; 86,361,186 shares issued and outstanding, pro forma (unaudited)

            9  

Additional paid-in capital

    408     874     87,439  

Accumulated deficit

    (37,688 )   (57,260 )   (57,260 )
       

Total stockholders' (deficit) equity

    (37,280 )   (56,386 ) $ 30,188  
       

Total liabilities, convertible preferred stock, and stockholders' deficit

  $ 53,103   $ 34,148        
   

   

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Invitae Corporation
Condensed consolidated statements of operations and comprehensive loss
(Unaudited)

   
 
  Six months ended June 30,  
(In thousands, except share and per share amounts)
  2013
  2014
 
   

Revenue

  $ 6   $ 419  

Costs and operating expenses:

             

Cost of revenue

    252     1,574  

Research and development

    6,165     10,043  

Selling and marketing

    934     3,437  

General and administrative

    2,290     4,900  
       

Total costs and operating expenses

    9,641     19,954  
       

Loss from operations

    (9,635 )   (19,535 )

Other income (expense), net

    2     (3 )

Interest expense

    (30 )   (34 )
       

Net loss and comprehensive loss

  $ (9,663 ) $ (19,572 )
       

Net loss attributable to common stockholders

  $ (9,814 ) $ (19,572 )
       

Net loss per share attributable to common stockholders, basic and diluted

  $ (2.43 ) $ (4.15 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted

    4,040,221     4,716,280  
       

Pro forma net loss per share attributable to common stockholders, basic and diluted

        $ (0.23 )
             

Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted

          85,847,804  
   

   

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Invitae Corporation
Condensed consolidated statements of cash flows
(Unaudited)

   
 
  Six months ended
June 30,
 
(In thousands)
  2013
  2014
 
   

Cash flow from operating activities

             

Net loss

  $ (9,663 ) $ (19,572 )

Adjustments to reconcile net loss to net cash used in operating activities:

             

Depreciation and amortization

    369     967  

Stock-based compensation

    83     324  

Changes in operating assets and liabilities:

             

Prepaid expenses and other current assets

    (66 )   (766 )

Other assets

    (2 )   (191 )

Accounts payable

    688     (75 )

Accrued liabilities

    577     650  
       

Net cash used in operating activities

    (8,014 )   (18,663 )
       

Cash flows from investing activities

             

Purchases of property and equipment

    (1,058 )   (2,069 )

Change in restricted cash

        (30 )
       

Net cash used in investing activities

    (1,058 )   (2,099 )
       

Cash flows from financing activities

             

Capital lease principal payment

    (335 )   (403 )

Proceeds from issuance of common stock upon exercise of stock options

    34     134  

Proceeds from issuance of convertible preferred stock, net of issuance costs

    9,933      
       

Net cash provided by (used in) financing activities

    9,632     (269 )
       

Net increase (decrease) in cash and cash equivalents

    560     (21,031 )

Cash and cash equivalents at beginning of period

    21,801     43,070  
       

Cash and cash equivalents at end of period

  $ 22,361   $ 22,039  
       

Supplemental cash flow information:

             

Interest paid

  $ 28   $ 17  
       

Supplemental cash flow information of non-cash investing and financing activities:

             

Equipment acquired through capital leases

  $ 411   $  
       

Change in accounts payable and accrued liabilities related to purchase of property and equipment

  $ 2,195   $ (13 )
   

   

The accompanying notes are an integral part of these condensed financial statements.

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Invitae Corporation
Notes to condensed consolidated financial statements

1.     Summary of significant accounting policies

Unaudited interim consolidated financial statements

The interim condensed consolidated balance sheet as of June 30, 2014, and the consolidated statements of operations and comprehensive loss and cash flows for the six months ended June 30, 2013 and 2014 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position as of June 30, 2014 and its results of operations and cash flows for the six months ended June 30, 2013 and 2014. The financial data and the other financial information contained in these notes to the consolidated financial statements related to the six-month periods are also unaudited. The results of operations for the six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other future annual or interim period. These financial statements should be read in conjunction with the Company's audited consolidated financial statements included elsewhere in this prospectus.

Unaudited pro forma stockholders' equity

The pro forma stockholders' equity as of June 30, 2014 presents the Company's stockholders' equity as though all of the Company's convertible preferred stock outstanding had automatically converted into 81,131,524 shares of common stock upon the completion of a qualifying initial public offering ("IPO") of the Company's common stock. The shares of common stock issuable and the proceeds expected to be received in the IPO are excluded from such pro forma financial information.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition; the recoverability of long-lived assets; the fair value of the Company's common stock; stock-based compensation expense; and income tax uncertainties. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those estimates and assumptions.

Concentrations of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company's cash and cash equivalents are held by financial institutions in the United States and Chile. Such deposits may exceed federally insured limits.

For the six months ended June 30, 2013 and 2014, substantially all of the Company's revenue has been derived from sales of its assay of 216 genes. Teva Pharmaceuticals Industries Ltd. accounted for 20% of the Company's revenue for the six months ended June 30, 2014. For the six months ended June 30, 2013 and 2014 no other customers represented over 10% of total revenue.

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.

Restricted cash

Restricted cash consists of a money market account that serves as collateral for a credit card agreement at one of the Company's financial institutions.

Internal-use software

The Company capitalizes third-party costs incurred in the application development stage to design and implement the software used in its genetic tests and Family History Tool mobile application. Costs incurred in the application development stage of the software and mobile application are capitalized and will be amortized over an estimated useful life of three years on a straight line basis.

During the six months ended June 30, 2013 and 2014, the Company capitalized $100,000 and $400,000, respectively, of software development costs. Such costs are included within property and equipment on the balance sheets.

Revenue recognition

Revenue is generated from the sale of tests that provides the analysis and associated interpretation of the sequencing of parts of the genome. Revenue associated with subsequent re-requisition services was de minimis for all periods presented.

Revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management's judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payer's individual payment patterns. The Company reviews the number of tests paid against the number of tests billed and the payer's outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. The Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received.

Net loss per share attributable to common stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since the effects of potentially dilutive securities are antidilutive. Common shares subject to repurchase are excluded from the weighted-average shares. For the six months ended June 30, 2013 and 2014, 440,840 and 240,446 shares subject to repurchase, respectively, are excluded from basic loss per share calculation.

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

Pro forma net loss per share attributable to common stockholders

In contemplation of an initial public offering, the Company has presented the pro forma basic and diluted net loss per share attributable to common stockholders which has been computed to give effect to the conversion of its convertible preferred stock into common stock.

Recent accounting pronouncements

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation ("ASU 2014-10"). ASU 2014-10 simplifies the accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments related to the elimination of the inception-to-date information and other disclosure requirements of Topic 915 should be applied retrospectively, and are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. The Company early adopted this guidance as of January 1, 2012, and accordingly, there is no inception-to-date information presented in these consolidated financial statements.

2.     Balance sheet components

Property and equipment, net

Property and equipment, net, consists of the following (in thousands):

   
 
  December 31,
2013

  June 30,
2014

 
   

Leasehold improvements

  $ 1,527   $ 1,527  

Laboratory equipment

    3,567     3,702  

Equipment under capital lease

    3,735     3,735  

Computer equipment

    120     580  

Software

    18     418  

Furniture and fixtures

    21     21  

Automobiles

    16      

Construction-in-process

    410     1,487  
       

Total property and equipment, gross

    9,414     11,470  

Accumulated depreciation and amortization

    (1,250 )   (2,217 )
       

Total property and equipment, net

  $ 8,164   $ 9,253  
   

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

Depreciation and amortization expense for the six months ended June 30, 2013 and 2014 was $369,000 and $967,000, respectively.

Accrued liabilities

Accrued liabilities consist of the following (in thousands):

   
 
  December 31,
2013

  June 30,
2014

 
   

Accrued compensation and related expenses

  $ 279   $ 423  

Accrued professional services

    201     624  

Accrued costs for construction-in-process

    168     87  

Other

    238     336  
       

Total accrued liabilities

  $ 886   $ 1,470  
   

3.     Fair value measurements

Financial assets and liabilities are recorded at fair value. The carrying amounts of certain of the Company's financial instruments, including cash equivalents, and accounts payable, are valued at cost, which approximates fair value due to their short maturities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The authoritative guidance establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

    Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

    Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.

    Level 3—Unobservable inputs that reflect the reporting entity's own assumptions.

The Company's financial instruments consist only of Level 1 assets, which are highly liquid money market funds. At December 31, 2013 and June 30, 2014, the Company had $33.2 million and $21.2 million in money market funds that are included in cash and cash equivalents on the consolidated balance sheets.

4.    Legal matters

On November 25, 2013, the University of Utah Research Foundation, the Trustees of the University of Pennsylvania, HSC Research and Development Limited Partnership, Endorecherche, Inc. and Myriad Genetics, Inc. (collectively, the "Myriad Plaintiffs") filed a complaint in the District of Utah (the "Utah

F-31


Table of Contents


Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

Action"), alleging that certain of the Company's genetic testing services infringe certain claims of various U.S. patents (collectively, the "Myriad Patents"). On November 26, 2013, the Company filed a complaint for declaratory judgment in the Northern District of California (the "California Action"), asserting that the Myriad Patents are invalid and the Company does not infringe them, and the Myriad Plaintiffs have counterclaimed alleging that the Company infringes the Myriad Patents. Although the Utah Action has been dismissed, on February 19, 2014, the Joint Panel on Multidistrict Litigation granted the Myriad Plaintiffs' motion to consolidate for pre-trial proceedings all actions concerning the Myriad Patents (the "MDL Proceedings"), with the MDL Proceedings taking place in the District of Utah. Upon the conclusion of the MDL Proceedings, any remaining aspects of the California Action would be transferred back to the Northern District of California for further proceedings, if needed. The Company intends to continue to pursue this matter and defend itself vigorously. Because of the uncertainties related to the legal proceedings, the Company is not able to predict or estimate any range of reasonably possible loss related to the Myriad matters. Accordingly, the Company has not accrued for contingent liabilities associated with the legal matters described above. In the event of a successful claim of infringement or misappropriation against the Company, it may be required to pay damages and obtain one or more licenses from third parties, or be prohibited from commercializing certain tests, all of which could have a material adverse impact on the Company's cash position and business and financial condition.

5.     Stock incentive plan

2010 Equity incentive plan

The following table summarizes option activity under the 2010 Plan and related information during the six months ended June 30, 2014:

   
(In thousands)
  Shares
available
for grant

  Stock options
outstanding

  Weighted-
average
exercise price

  Weighted-
average
remaining
contractual life
(years)

  Aggregate
intrinsic
value

 
   

Balances at December 31, 2013

    5,239,124     7,038,380   $ 0.26     9.00   $ 2,155  

Granted

    (3,350,500 )   3,350,500     0.58              

Cancelled

    443,500     (443,500 )   0.36              

Exercised

        (747,608 )   0.18              
                             

Balances at June 30, 2014

    2,332,124     9,197,772   $ 0.38     8.94   $ 5,400  
                             

Options exercisable at June 30, 2014

          1,719,518   $ 0.18     8.13   $ 1,354  
                               

Options vested and expected to vest at June 30, 2014

          8,936,481   $ 0.38     8.93   $ 5,291  
   

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company's common stock for stock options that were in-the-money.

The weighted-average fair value of stock options granted was $0.16 and $0.50 per share in the six months ended June 30, 2013 and 2014, respectively.

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

The fair value of options to purchase common stock vested was $22,000 and $164,000 in the six months ended June 30, 2013 and 2014, respectively.

The intrinsic value of options to purchase common stock exercised was $18,000 and $368,000 in the six months ended June 30, 2013 and 2014, respectively.

Early exercise of stock options

The 2010 Plan allows for the granting of options that may be exercised before the options have vested. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser's employment or services, at the price paid by the purchaser, and are not deemed to be issued for accounting purposes until those related shares vest. The amounts received in exchange for these shares have been recorded as a liability on the accompanying balance sheets and will be reclassified into common stock and additional paid-in-capital as the shares vest. The Company's right to repurchase these shares generally lapses 1/4 after a one-year cliff then at a monthly rate of 1/48 thereafter.

At December 31, 2013 and June 30, 2014, there were 326,465 and 240,446 shares of common stock outstanding, respectively, subject to the Company's right of repurchase at prices ranging from $0.05 to $0.21 per share. At December 31, 2013 and June 30, 2014, the Company recorded $31,000 and $23,000, respectively, as liabilities associated with shares issued with repurchase rights.

Stock-based compensation

Stock-based compensation expense recognized was as follows (in thousands):

   
 
  Six months
ended
June 30,
 
 
  2013
  2014
 
   

Cost of revenue

  $ 4   $ 24  

Research and development

    53     148  

Selling and marketing

    13     55  

General and administrative

    13     97  
       

Total stock-based compensation expense

  $ 83   $ 324  
   

As of June 30, 2014, the Company had $2.4 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over an estimated weighted-average period of 3.3 years.

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

The estimated grant date fair value of employee stock options was calculated using the Black-Scholes option-pricing valuation model, based on the following assumptions:

   
 
  Six months
ended
June 30,
 
 
  2013
  2014
 
   

Expected term (in years)

    6.03     6.03  

Expected volatility

    93.1%     86.5%  

Risk-free interest rate

    1.12%     1.77%  

Dividend yield

         
   

Stock-based compensation related to stock options granted to non-employees is recognized as the stock options are earned. The fair value of the stock options granted is calculated at each reporting date using the Black-Scholes option pricing model with the following assumptions: expected life is equal to the remaining contractual term of the award as of the measurement date, which was 9.8 years as of June 30, 2013 and 8.8 to 9.8 years as of June 30, 2014; risk free rate is based on the U.S. Treasury Constant Maturity rate with a term similar to the expected life of the option at the measurement date; expected dividend yield of 0%; and volatility of 93.6% and 85.7% as of June 30, 2013 and 2014, respectively.

6.     Net loss per share attributable to common stockholders and pro forma net loss per share attributable to common stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the six months ended June 30, 2013 and 2014 (in thousands, except share and per share amounts):

   
 
  Six months ended June 30,  
 
  2013
  2014
 
   

Net loss

  $ (9,663 ) $ (19,572 )

Less: dividend on convertible preferred stocks

    (151 )    
       

Net loss attributable to common stockholders

  $ (9,814 ) $ (19,572 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted

    4,040,221     4,716,280  
       

Net loss per share attributable to common stockholders, basic and diluted

  $ (2.43 ) $ (4.15 )
   

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

   
 
  Six months ended June 30,  
 
  2013
  2014
 
   

Shares of common stock subject to outstanding options

    5,166,380     9,197,772  

Shares of common stock subject to conversion from preferred stock

    54,987,747     81,131,524  

Shares of common stock subject to unvested early exercise of outstanding options subject to repurchase

    440,840     240,446  
       

Total shares of common stock equivalents

    60,594,967     90,569,742  
   

The following table sets forth the computation of the Company's pro forma basic and diluted net loss per share attributable to common stockholders during the six months ended June 30, 2014 (in thousands, except share and per share amounts):

   
 
  Six months
ended
June 30, 2014

 
   

Net loss

  $ (19,572 )
       

Shares used in computing net loss per share attributable to common stockholders, basic and diluted

    4,716,280  

Pro forma adjustments to reflect assumed conversion of convertible preferred stock

    81,131,524  
       

Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted

    85,847,804  
       

Pro forma net loss per share attributable to common stockholders, basic and diluted

  $ (0.23 )
   

7.     Geographic information

Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for the six months ended June 30, 2013 and 2014 (in thousands):

   
 
  Six months
ended
June 30
 
(In thousands)
  2013
  2014
 
   

United States

  $ 6   $ 253  

Israel

        85  

Rest of world

        81  
       

Revenue

  $ 6   $ 419  
   

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

8.     Subsequent events

Series F convertible preferred stock

In August 2014, the Company issued 24,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate gross proceeds of $49.0 million.

In October 2014, the Company issued 35,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate gross proceeds of $71.0 million.

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GRAPHIC


Table of Contents


                       shares

GRAPHIC

Common stock

Prospectus

J.P. Morgan

Cowen and Company

 
Leerink Partners

                           , 2015


Table of Contents


Part II
Information not required in prospectus

Item 13.    Other expenses of issuance and distribution

The following table sets forth the various expenses expected to be incurred by the Registrant in connection with the sale and distribution of the securities being registered hereby, other than underwriting discounts and commissions. All amounts are estimated except the SEC registration fee and the Financial Industry Regulatory Authority filing fee.

   

SEC registration fee

  $ *  

Financial Industry Regulatory Authority filing fee

    *  

NYSE filing fee

    *  

Blue Sky fees and expenses

    *  

Accounting fees and expenses

    *  

Legal fees and expenses

    *  

Printing and engraving expenses

    *  

Registrar and Transfer Agent fees

    *  

Miscellaneous fees and expenses

    *  
       

Total

  $ *  
   

*      To be filed by amendment.

Item 14.    Indemnification of directors and officers

Section 102 of the DGCL allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except where the director breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of the DGCL or obtained an improper personal benefit.

Section 145 of the DGCL provides, among other things, that we may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding—other than an action by or in the right of the Registrant—by reason of the fact that the person is or was a director, officer, agent or employee of the Registrant, or is or was serving at our request as a director, officer, agent or employee of another corporation, partnership, joint venture, trust or other enterprise against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding. The power to indemnify applies (a) if such person is successful on the merits or otherwise in defense of any action, suit or proceeding, or (b) if such person acting in good faith and in a manner he or she reasonably believed to be in the best interest, or not opposed to the best interest, of the Registrant, and with respect to any criminal action or proceeding had no reasonable cause to believe his or her conduct was unlawful. The power to indemnify applies to actions brought by or in the right of the Registrant as well but only to the extent of defense expenses, including attorneys' fees but excluding amounts paid in settlement, actually and reasonably incurred and not to any satisfaction of judgment or settlement of the claim itself, and with the further limitation that in such actions no indemnification shall be made in the event of any adjudication of liability to the Registrant, unless the court believes that in light of all the circumstances indemnification should apply.

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Section 174 of the DGCL provides, among other things, that a director, who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.

The Registrant's amended and restated certificate of incorporation and amended and restated bylaws, to be filed as Exhibits 3.1(b) and 3.2(b) hereto, provide that the Registrant shall indemnify its directors, officers, employees and other agents to the fullest extent not prohibited by the DGCL or any other applicable law. In addition, the Registrant has entered into agreements to indemnify its directors and expects to continue to enter into agreements to indemnify all of its directors. Prior to the closing of the offering, the Registrant plans to amend and restate its indemnification agreements with its directors and enter into similar agreements with each of its officers. These agreements will require the Registrant, among other things, to indemnify its directors and officers against certain liabilities which may arise by reason of their status or service as directors or officers to the fullest extent not prohibited by law. These indemnification provisions and the indemnification agreements may be sufficiently broad to permit indemnification of the Registrant's officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act of 1933, as amended, which we refer to as the Securities Act. The Registrant also intends to maintain director and officer liability insurance, if available on reasonable terms.

The form of Underwriting Agreement, to be filed as Exhibit 1.1 hereto, provides for indemnification by the Underwriters of the Registrant and its officers and directors for certain liabilities, including liabilities arising under the Securities Act, and affords certain rights of contribution with respect thereto.

Item 15.    Recent sales of unregistered securities

The following sets forth information regarding all unregistered securities sold during the period from October 31, 2011 through October 31, 2014:

On various dates between May 2012 and July 2012, the Registrant issued and sold convertible promissory notes in the aggregate principal amount of $2,000,000 to a total of 4 accredited investors. These notes converted into 2,124,277 shares of the Registrant's Series C convertible preferred stock in August 2012 as described in the paragraph immediately below.(1)

On various dates between August 2012 and October 2012, the Registrant issued and sold an aggregate of 31,112,750 shares of Series C convertible preferred stock at a per share price of $0.95, for an aggregate purchase price of $29,557,114 to a total of 16 accredited investors. Of this amount, $2,018,060 was paid for by cancellation of principal and accrued interest under the convertible promissory notes described in the paragraph immediately above.(1)

In May 2013, the Registrant issued and sold an aggregate of 8,000,000 shares of Series D convertible preferred stock at a per share price of $1.25, for an aggregate purchase price of $10,000,000 to a total of four accredited investors.(1)

On various dates between October 2013 and December 2013, the Registrant issued and sold an aggregate of 26,143,777 shares of Series E convertible preferred stock at a per share price of $1.53, for an aggregate purchase price of $39,999,979 to a total of 32 accredited investors.(1)

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In August 2014 and October 2014, the Registrant issued and sold an aggregate of 60,000,000 shares of Series F convertible preferred stock at a per share price of $2.00, for an aggregate purchase price of $120,000,000 to a total of 38 accredited investors.(1)

The Registrant has granted stock options to its directors, officers, employees and consultants to purchase an aggregate of 14,670,495 shares of common stock pursuant to the Registrant's 2010 Stock Plan, with exercise prices ranging from $0.06 to $1.45 per share.(2)

The Registrant has issued and sold an aggregate of 1,583,846 shares of its common stock upon exercise of stock options granted pursuant to the Registrant's 2010 Stock Plan, for an aggregate purchase price of $244,743. Amounts include the exercise of options to purchase an aggregate of 11,757 shares of common stock that were subsequently repurchased pursuant to the Registrant's right of repurchase.(2)

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and the Registrant believes that each transaction was exempt from the registration requirements of the Securities Act in reliance on the following exemptions:

(1)    These transactions were deemed to be exempt from registration under the Securities Act in reliance upon Rule 506 of Regulation D promulgated under the Securities Act as transactions by an issuer not involving any public offering. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate information about the Registrant or had adequate access, through their relationships with the Registrant, to information about the Registrant.

(2)    These transactions were deemed to be exempt from registration under the Securities Act in reliance upon Rule 701 promulgated under Section 3(b) of the Securities Act pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate information about the Registrant or had adequate access, through their relationships with the Registrant, to information about the Registrant.

There were no underwriters employed in connection with any of the transactions set forth in Item 15.

Item 16.    Exhibits and financial statement schedules

(a)    Exhibits

See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this registration statement on Form S-1, which Exhibit Index is incorporated hereby by reference.

(b)   Financial Statement Schedules.

Not applicable.

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Item 17.    Undertakings

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1)    For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2)    For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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Signatures

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of San Francisco, State of California, on the      day of                     , 2014.

    INVITAE CORPORATION

 

 

By:

 

  

Randal W. Scott, Ph.D.
Chief Executive Officer


Power of attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Randal W. Scott and Lee Bendekgey, and each of them, his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this Registration Statement, and any registration statement relating to the offering covered by this Registration Statement and filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 
Name
  Title
  Date
 

 

 

 

 

 
  

Randal W. Scott, Ph.D.
  Chairman of the Board of Directors and Chief Executive Officer
(Principal Executive Officer)
                          , 2014

  

Lee Bendekgey

 

Chief Financial Officer, General Counsel and Secretary
(Principal Financial Officer)

 

                        , 2014

  

Patricia E. Dumond

 

Vice President, Finance
(Principal Accounting Officer)

 

                        , 2014

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Name
  Title
  Date
 

 

 

 

 

 
  

Sean E. George, Ph.D.
  President, Chief Operating Officer and Director                           , 2014

 

Eric Aguiar, M.D.

 

Director

 

                        , 2014

 

Geoffrey S. Crouse

 

Director

 

                        , 2014

 

 

 

 

 

 

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Exhibit index

 
Exhibit
number

  Description
 
  1.1 * Form of Underwriting Agreement.

 

3.1

(a)

Amended and Restated Certificate of Incorporation, as currently in effect.

 

3.1

(b)*

Form of Certificate of Amendment of Amended and Restated Certificate of Incorporation, to be effective prior to completion of this offering.

 

3.1

(c)*

Form of Amended and Restated Certificate of Incorporation, to be in effect upon the completion of this offering.

 

3.2

(a)

Bylaws, as currently in effect.

 

3.2

(b)*

Form of Amended and Restated Bylaws, to be in effect upon the completion of this offering.

 

4.1

*

Form of Common Stock Certificate.

 

4.2

 

Fifth Amended and Restated Investors' Rights Agreement, dated August 26, 2014, among Invitae Corporation and certain investors.

 

4.3

 

Omnibus Approval and Amendment with Respect to: Series F Preferred Stock Purchase Agreement; Fifth Amended and Restated Investors' Rights Agreement; and Fifth Amended and Restated Voting Agreement, dated October 9, 2014, among Invitae Corporation and certain investors.

 

5.1

*

Opinion of Pillsbury Winthrop Shaw Pittman LLP.

 

10.1

#*

Form of Indemnification Agreement to be entered into between Invitae Corporation and its officers and directors upon completion of this offering.

 

10.2

#

2010 Stock Incentive Plan, as amended.

 

10.3

#

Form of Notice of Stock Option Grant and Stock Option Agreement—Standard Exercise for awards granted under 2010 Stock Incentive Plan.

 

10.4

#

Form of Notice of Stock Option Grant and Stock Option Agreement—Early Exercise for awards granted under 2010 Stock Incentive Plan.

 

10.5

#*

Form of 2015 Stock Incentive Plan.

 

10.6

#*

Form of Non-Qualified Stock Option Agreement for awards granted under the 2015 Stock Incentive Plan.

 

10.7

#*

Form of Restricted Stock Agreement for awards granted under the 2015 Stock Incentive Plan.

 

10.8

#*

Form of Employee Stock Purchase Plan.

 

10.9

#

Executive Employment Agreement, dated July 30, 2010, by and between Invitae Corporation (f/k/a Locus Development, Inc.) and Sean E. George.

 

10.10

#

Amendment No. 1 to Executive Employment Agreement, dated September 2, 2010, by and between Invitae Corporation (f/k/a Locus Development, Inc.) and Sean E. George.

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Exhibit
number

  Description
 
  10.11 # Restricted Stock Purchase Agreement, dated July 15, 2010, by and between Invitae Corporation (f/k/a Locus Development, Inc.) and Sean E. George.

 

10.12

*

Lease (Standard Form), dated September 1, 2011, by and between Invitae Corporation (f/k/a Locus Development, Inc.) and Martin E. Harband, Trustee of the Harband Family Trust.

 

10.13

*

Sublease, dated December 6, 2013, by and between Invitae Corporation and Sutter West Bay Hospitals.

 

10.14

*

Lease, dated February 13, 2004, by and between SKS Brannan Associates, LLC and California Pacific Medical Center.

 

10.15

*

First Amendment to Lease (Expansion and Extension), dated November 29, 2006, by and between PRU/SKS Brannan Associates, LLC and California Pacific Medical Center.

 

10.16

*

Lease, dated October 31, 2012, by and between Invitae Corporation and 278 University Investors, LLC.

 

21.1

 

List of Subsidiaries.

 

23.1

*

Consent of independent registered public accounting firm.

 

23.2

*

Consent of Pillsbury Winthrop Shaw Pittman LLP (included in Exhibit 5.1).

 

24.1

 

Power of Attorney (see signature page hereto).

 

 

 

 

 

*      To be filed by amendment.

#      Management contract or compensatory arrangement.

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EX-3.1(A) 2 filename2.htm

Exhibit 3.1(a)

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INVITAE CORPORATION

 

(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)

 

Invitae Corporation, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

 

DOES HEREBY CERTIFY:

 

1.                                      That the name of this corporation is Invitae Corporation, and that this corporation was originally incorporated (as Locus Development, Inc.) pursuant to the General Corporation Law on January 13, 2010.  This corporation has previously filed Amended and Restated Certificates of Incorporation with the Secretary of State of the State of Delaware on September 2, 2010, March 15, 2011, August 8, 2012, May 14, 2013, October 16, 2013, and August 25, 2014.

 

2.                                      That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

 

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

 

FIRST:  The name of this corporation is Invitae Corporation (the “Corporation”).

 

SECOND:  The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801.  The name of its registered agent at such address is The Corporation Trust Company.

 

THIRD:  The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

 

FOURTH:  The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 160,131,524 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and (ii) 141,131,524 shares of Preferred Stock, $0.0001 par value per share, of which 11,693,179 shares shall be designated “Series A Preferred Stock,” 4,181,818 shares shall be designated “Series B Preferred Stock,” 31,112,750 shares shall be designated “Series C Preferred Stock,” 8,000,000 shares shall be designated “Series D Preferred Stock,” 26,143,777 shares shall be designated “Series E Preferred Stock” and 60,000,000 shares shall be designated “Series F Preferred Stock” (Series A Preferred Stock,

 



 

Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock are referred to herein collectively as “Preferred Stock”).

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A.                        COMMON STOCK

 

1.                                      General.  The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.                                      Voting.  The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings); provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to the Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation or pursuant to the General Corporation Law.  The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

B.                        PREFERRED STOCK

 

The rights, preferences, powers, privileges and restrictions, qualifications and limitations of the Preferred Stock are as follows (note: Unless otherwise indicated, references to “Sections” or “Subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth):

 

1.                                      Dividends.

 

1.1                               Series A Preferred Stock Dividends.  From and after the date of the issuance of any shares of Series A Preferred Stock, but solely until May 14, 2013, dividends at the rate per annum of $0.0352 per share shall accrue on such shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) (the “Series A Accruing Dividends”).  Series A Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided, however, that (a) except as set forth in the following sentence of this Subsection 1.1 or in Subsection 2.1, such Series A Accruing Dividends shall be payable only when, as, and if declared by the Corporation’s Board of Directors (the “Board”) and the Corporation shall be under no obligation to pay such Series A Accruing Dividends, and (b) the Series A Accruing Dividends shall cease accruing for all purposes as of May 14, 2013.  The Corporation shall not declare, pay or set aside any dividends

 

2



 

on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, on a pari passu basis with dividends paid on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock (except, as applicable, with respect to any amount of the Series A Accruing Dividends then accrued but not previously paid, which shall be prior and in preference to dividends paid the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock), a dividend on each outstanding share of Series A Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Series A Accruing Dividends then accrued on such share of Series A Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series A Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series A Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend, or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series A Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series A Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series A Preferred Stock pursuant to this Subsection 1.1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series A Preferred Stock dividend.  The “Series A Original Issue Price” shall mean $0.44 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock.  The holders of the Series A Preferred Stock may waive any dividend preference that such holders shall be entitled to receive under this Subsection 1.1 upon the affirmative vote or written consent of the holders of a majority of the outstanding Series A Preferred Stock.

 

1.2                               Series B Preferred Stock DividendsThe holders of the Series B Preferred Stock shall be entitled to receive dividends at the applicable Series B Dividend Rate (as defined below), payable out of funds legally available therefor, pari passu with dividends paid on the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock (except, as applicable, with respect to any amount of the Series A Accruing Dividends then accrued but not previously paid, which shall be prior and in preference to dividends paid on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock) and prior and in preference to any declaration or payment of any dividend on the Common Stock (other than dividends payable solely in Common Stock); provided, however, that such dividends shall be payable only when, as and if declared by the Board and shall be noncumulative.  The “Series B Dividend Rate” shall mean $0.044 per annum for each share of Series B Preferred

 

3



 

Stock (as adjusted for any stock dividends, stock splits, stock combinations, recapitalizations or similar events with respect to such shares).  The Corporation shall not declare, pay or set aside any dividends on shares of Common Stock (other than dividends payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series B Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Preferred Stock in an amount at least equal to the greater of (i) the Series B Dividend Rate less the amount of any dividend previously paid during the then current year on the Series B Preferred Stock and (ii) that dividend per share of Series B Preferred Stock as would equal the product of (1) the dividend payable on each share of Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series B Preferred Stock (calculated on the record date for determination of holders entitled to receive such dividend).  The holders of the Series B Preferred Stock may waive any dividend preference that such holders shall be entitled to receive under this Subsection 1.2 upon the affirmative vote or written consent of the holders of a majority of the outstanding Series B Preferred Stock.

 

1.3                               Series C Preferred Stock DividendsThe holders of the Series C Preferred Stock shall be entitled to receive dividends at the applicable Series C Dividend Rate (as defined below), payable out of funds legally available therefor, pari passu with dividends paid on the Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock (except, as applicable, with respect to any amount of the Series A Accruing Dividends then accrued but not previously paid, which shall be prior and in preference to dividends paid on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock) and prior and in preference to any declaration or payment of any dividend on the Common Stock (other than dividends payable solely in Common Stock); provided, however, that such dividends shall be payable only when, as and if declared by the Board and shall be noncumulative.  The “Series C Dividend Rate” shall mean $0.076 per annum for each share of Series C Preferred Stock (as adjusted for any stock dividends, stock splits, stock combinations, recapitalizations or similar events with respect to such shares).  The Corporation shall not declare, pay or set aside any dividends on shares of Common Stock (other than dividends payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series C Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series C Preferred Stock in an amount at least equal to the greater of (i) the Series C Dividend Rate less the amount of any dividend previously paid during the then current year on the Series C Preferred Stock and (ii) that dividend per share of Series C Preferred Stock as would equal the product of (1) the dividend payable on each share of Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series C Preferred Stock (calculated on the record date for determination of holders entitled to receive such dividend).  The holders of the Series C Preferred Stock may waive any dividend preference that such holders shall be entitled to receive under this Subsection 1.3 upon the affirmative vote or written consent of the holders of a majority of the outstanding Series C Preferred Stock.

 

1.4                               Series D Preferred Stock DividendsThe holders of the Series D Preferred Stock shall be entitled to receive dividends at the applicable Series D Dividend Rate (as defined below), payable out of funds legally available therefor, pari passu with dividends paid on the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series E Preferred

 

4



 

Stock and Series F Preferred Stock (except, as applicable, with respect to any amount of the Series A Accruing Dividends then accrued but not previously paid, which shall be prior and in preference to dividends paid on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock) and prior and in preference to any declaration or payment of any dividend on the Common Stock (other than dividends payable solely in Common Stock); provided, however, that such dividends shall be payable only when, as and if declared by the Board and shall be noncumulative.  The “Series D Dividend Rate” shall mean $0.10 per annum for each share of Series D Preferred Stock (as adjusted for any stock dividends, stock splits, stock combinations, recapitalizations or similar events with respect to such shares).  The Corporation shall not declare, pay or set aside any dividends on shares of Common Stock (other than dividends payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series D Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series D Preferred Stock in an amount at least equal to the greater of (i) the Series D Dividend Rate less the amount of any dividend previously paid during the then current year on the Series D Preferred Stock and (ii) that dividend per share of Series D Preferred Stock as would equal the product of (1) the dividend payable on each share of Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series D Preferred Stock (calculated on the record date for determination of holders entitled to receive such dividend).  The holders of the Series D Preferred Stock may waive any dividend preference that such holders shall be entitled to receive under this Subsection 1.4 upon the affirmative vote or written consent of the holders of a majority of the outstanding Series D Preferred Stock.

 

1.5                               Series E Preferred Stock DividendsThe holders of the Series E Preferred Stock shall be entitled to receive dividends at the applicable Series E Dividend Rate (as defined below), payable out of funds legally available therefor, pari passu with dividends paid on the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series F Preferred Stock (except, as applicable, with respect to any amount of the Series A Accruing Dividends then accrued but not previously paid, which shall be prior and in preference to dividends paid on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock) and prior and in preference to any declaration or payment of any dividend on the Common Stock (other than dividends payable solely in Common Stock); provided, however, that such dividends shall be payable only when, as and if declared by the Board and shall be noncumulative.  The “Series E Dividend Rate” shall mean $0.1224 per annum for each share of Series E Preferred Stock (as adjusted for any stock dividends, stock splits, stock combinations, recapitalizations or similar events with respect to such shares).  The Corporation shall not declare, pay or set aside any dividends on shares of Common Stock (other than dividends payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series E Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series E Preferred Stock in an amount at least equal to the greater of (i) the Series E Dividend Rate less the amount of any dividend previously paid during the then current year on the Series E Preferred Stock and (ii) that dividend per share of Series E Preferred Stock as would equal the product of (1) the dividend payable on each share of Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series E Preferred Stock (calculated on the record date for determination of holders entitled to receive such dividend).  The holders of the Series E Preferred

 

5



 

Stock may waive any dividend preference that such holders shall be entitled to receive under this Subsection 1.5 upon the affirmative vote or written consent of the holders of a majority of the outstanding Series E Preferred Stock.

 

1.6                               Series F Preferred Stock DividendsThe holders of the Series F Preferred Stock shall be entitled to receive dividends at the applicable Series F Dividend Rate (as defined below), payable out of funds legally available therefor, pari passu with dividends paid on the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (except, as applicable, with respect to any amount of the Series A Accruing Dividends then accrued but not previously paid, which shall be prior and in preference to dividends paid on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock) and prior and in preference to any declaration or payment of any dividend on the Common Stock (other than dividends payable solely in Common Stock); provided, however, that such dividends shall be payable only when, as and if declared by the Board and shall be noncumulative.  The “Series F Dividend Rate” shall mean $0.16 per annum for each share of Series F Preferred Stock (as adjusted for any stock dividends, stock splits, stock combinations, recapitalizations or similar events with respect to such shares).  The Corporation shall not declare, pay or set aside any dividends on shares of Common Stock (other than dividends payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series F Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series F Preferred Stock in an amount at least equal to the greater of (i) the Series F Dividend Rate less the amount of any dividend previously paid during the then current year on the Series F Preferred Stock and (ii) that dividend per share of Series F Preferred Stock as would equal the product of (1) the dividend payable on each share of Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series F Preferred Stock (calculated on the record date for determination of holders entitled to receive such dividend).  The holders of the Series F Preferred Stock may waive any dividend preference that such holders shall be entitled to receive under this Subsection 1.6 upon the affirmative vote or written consent of the holders of a majority of the outstanding Series F Preferred Stock.

 

2.                                      Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

 

2.1                               Preferential Payments to Holders of Preferred Stock.  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof:  (i) in the case of Series A Preferred Stock, an amount per share equal to the Series A Original Issue Price, plus any Series A Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon; (ii) in the case of Series B Preferred Stock, an amount per share equal to the Series B Original Issue Price (as defined below), together with any dividends declared but unpaid thereon; (iii) in the case of Series C Preferred Stock, an amount per share equal to the Series C Original Issue Price (as defined below), together with any dividends declared but unpaid thereon; (iv) in the case of Series D Preferred Stock, an amount per share equal to the Series D Original Issue Price (as

 

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defined below), together with any dividends declared but unpaid thereon; (v) in the case of Series E Preferred Stock, an amount per share equal to the Series E Original Issue Price (as defined below), together with any dividends declared but unpaid thereon; or (vi) in the case of Series F Preferred Stock, an amount per share equal to the Series F Original Issue Price (as defined below), together with any dividends declared but unpaid thereon; provided, however, that if conversion of any series of Preferred Stock into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution or winding up would result in a greater payment for the holders of such series of Preferred Stock than otherwise provided by this sentence (after taking into account the conversion(s) of any other series of Preferred Stock where the conversion(s) of such series would also result in a greater payout for the holders of that/those series of Preferred Stock), then the holders of such series of Preferred Stock shall be entitled to such greater payment in lieu of the amount otherwise provided by this sentence.  The “Series B Original Issue Price” shall mean $0.55 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock.  The “Series C Original Issue Price” shall mean $0.95 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series C Preferred Stock.  The “Series D Original Issue Price” shall mean $1.25 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Preferred Stock.  The “Series E Original Issue Price” shall mean $1.53 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series E Preferred Stock.  The “Series F Original Issue Price” shall mean $2.00 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series F Preferred Stock.  If upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.  The aggregate amount which a holder of a share of Preferred Stock is entitled to receive under this Subsection 2.1 is hereinafter referred to as the “Liquidation Amount.”

 

2.2                               Distribution of Remaining Assets.  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock as provided in Subsection 2.1, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of the shares of Common Stock pro rata based on the number of shares held by each such holder.

 

2.3                               Deemed Liquidation Events.

 

2.3.1                     Definition.  Unless an election is made otherwise by the holders of a majority of (i) the outstanding shares of Preferred Stock (voting together as a single class) and (ii) any series of Preferred Stock (voting exclusively and as a separate class) if any proceeds from an event described in Section 2.3.1(a) or 2.3.1(b) will not be distributed in accordance with the provisions of Section 2.1 applicable to the distribution of the proceeds of a Deemed

 

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Liquidation Event to the holders of such series of Preferred Stock, with any such election to be made by written notice sent to the Corporation at least 10 days prior to the effective date of any such event, each of the following events shall be considered a “Deemed Liquidation Event”:

 

(a)                                 a merger or consolidation in which:

 

(i)                          the Corporation is a constituent party or

 

(ii)                       a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

 

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation (provided that, for the purpose of this Subsection 2.3.1, all shares of Common Stock issuable upon exercise of Options (as defined below) outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined below) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); or

 

(b)                                 the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

 

2.3.2                     Effecting a Deemed Liquidation Event.

 

(a)                                 The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2.

 

(b)                                 Unless an election is made otherwise by the holders of a majority of (i) the outstanding shares of Preferred Stock (voting together as a single class) and (ii) each series of Preferred Stock (each voting exclusively and as a separate class), with any such election to be made by written notice sent to the Corporation no later than 60 days after the effective date of any such Deemed Liquidation Event, in the event of a Deemed Liquidation

 

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Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b), the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board), together with any other assets of the Corporation available for distribution to its stockholders (the “Available Proceeds”), to the extent legally available therefor, on or before the 90th day after such Deemed Liquidation Event (the “Redemption Date”), to redeem all outstanding shares of Preferred Stock at a price per share equal to the applicable Liquidation Amount.  Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall redeem a pro rata portion of each holder’s shares of Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor.  If applicable, the Corporation shall send written notice of the redemption (the “Redemption Notice”) to each holder of record of Preferred Stock not less than 10 days prior to the Redemption Date.  The Redemption Notice shall state: (w) the number of shares of Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date; (x) the applicable redemption price (i.e., the applicable Liquidation Amount); (y) the Redemption Date and the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and (z) that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed.  On or before the Redemption Date, each holder of shares of Preferred Stock, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4.1, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.  In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder.  If on the Redemption Date the Redemption Price payable upon redemption of the shares of Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares of Preferred Stock so called for redemption shall not have been surrendered, all rights with respect to any such shares of Preferred Stock shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.  Prior to the distribution or redemption provided for in this Subsection 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event.

 

2.3.3                     Amount Deemed Paid or Distributed.  The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash

 

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or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity.  The value of such property, rights or securities shall be determined in good faith by the Board.

 

2.3.4                     Allocation of EscrowIn the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is placed into escrow and/or is payable to the stockholders of the Corporation subject to contingencies, the Merger Agreement shall provide that (a) the portion of such consideration that is not placed in escrow and not subject to any contingencies (the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event and (b) any additional consideration which becomes payable to the stockholders of the Corporation upon release from escrow or satisfaction of contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction.

 

3.                                      Voting.

 

3.1                               General.  On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.  Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class.

 

3.2                               Election of Directors.  The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series A Director”); the holders of record of the shares of Series C Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series C Director”); and the holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Common Stock Director”).  Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.  If the holders of shares of Series A Preferred Stock, Series C Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Series A Preferred Stock, Series C Preferred Stock or Common Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or

 

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series of voting stock (including the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation.  At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.  Except as otherwise provided in this Subsection 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2.

 

3.3                               Preferred Stock Protective Provisions.

 

3.3.1                     Preferred Stock.

 

(a)                                 Majority Vote.  At any time when shares of Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

 

(i)                         liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing; or

 

(ii)                      create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary.

 

(b)                                 Two-Thirds Vote.  At any time when shares of Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least two-thirds (66-2/3%) of the then outstanding shares of Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

 

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(i)                         amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation;

 

(ii)                      create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption, or increase the authorized number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock;

 

(iii)                   (x) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock in respect of any such right, preference or privilege, or (y) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E

 

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Preferred Stock or Series F Preferred Stock in respect of any such right, preference or privilege;

 

(iv)                  purchase or redeem (or permit any subsidiary to purchase or redeem), or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, or (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the original purchase price or the then-current fair market value thereof;

 

(v)                     create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or permit any subsidiary to take any such action with respect to any debt security unless such debt security has received the prior approval of the Board;

 

(vi)                  increase or decrease the authorized number of directors constituting the Board; or

 

(vii)               substantially change the business of the Corporation.

 

3.3.2                     Series A Preferred Stock.  At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect: (a) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that alters, changes or otherwise affects, in each case adversely, the rights, preferences or privileges of the shares of Series A Preferred Stock but does not similarly alter, change or otherwise affect the rights, preferences or privileges of the other shares of Preferred Stock; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, or at parity with, the Series A Preferred Stock with respect to any rights, preferences or privileges (including, without

 

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limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse; (b) add or amend any provision of the Certificate of Incorporation or the Bylaws of the Corporation that causes or permits, or affects any vote, action or other event or circumstance that would require or permit, conversion of the Series A Preferred Stock to Common Stock or another class or series of capital stock of the Corporation; (c) amend any provision of the Certificate of Incorporation of the Corporation to change, or permit the changing of, (i) the amount payable to holders of Series A Preferred Stock on a Deemed Liquidation Event, the timing or form of such payments or the definition of a Deemed Liquidation Event, or (ii) the triggers, exceptions, or adjustments under Section 4.4 for future issuances of capital stock, in the case of each of this clause and the foregoing clause (i) in a manner adverse to the holders of Series A Preferred Stock in their capacities as such, or (iii) the provisions of this Section 3.3.2; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, at parity with, or junior to the Series A Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse for purposes of the foregoing clauses (i) and (ii); (d) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing, unless any proceeds from such transaction are distributed in accordance with Section 2 to the extent applicable to the holders of Series A Preferred Stock; or (e) increase the authorized number of shares of Series A Preferred Stock.

 

3.3.3                     Series B Preferred Stock.  At any time when shares of Series B Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series B Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect: (a) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that alters, changes or otherwise affects, in each case adversely, the rights, preferences or privileges of the shares of Series B Preferred Stock but does not similarly alter, change or otherwise affect the rights, preferences or privileges of the other shares of Preferred Stock; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, or at parity with, the Series B Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse; (b) add or amend any provision of the Certificate of Incorporation or the Bylaws of the Corporation that causes or permits, or affects any vote, action or other event or circumstance that would require or permit, conversion of the Series B Preferred Stock to Common Stock or another class or series of capital stock of the Corporation; (c) amend any provision of the Certificate of Incorporation of the Corporation to change, or permit the changing of, (i) the amount payable to holders of Series B Preferred Stock on a Deemed Liquidation Event, the timing or form of such payments or the definition of a Deemed Liquidation Event, or (ii) the triggers, exceptions, or adjustments under Section 4.4 for future issuances of capital stock, in the case of each of this clause and the foregoing clause (i) in a

 

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manner adverse to the holders of Series B Preferred Stock in their capacities as such, or (iii) the provisions of this Section 3.3.3; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, at parity with, or junior to the Series B Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse for purposes of the foregoing clauses (i) and (ii); (d) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing, unless any proceeds from such transaction are distributed in accordance with Section 2 to the extent applicable to the holders of Series B Preferred Stock; or (e) increase the authorized number of shares of Series B Preferred Stock.

 

3.3.4                     Series C Preferred Stock.  At any time when shares of Series C Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series C Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect: (a) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that alters, changes or otherwise affects, in each case adversely, the rights, preferences or privileges of the shares of Series C Preferred Stock but does not similarly alter, change or otherwise affect the rights, preferences or privileges of the other shares of Preferred Stock; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, or at parity with, the Series C Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse; (b) add or amend any provision of the Certificate of Incorporation or the Bylaws of the Corporation that causes or permits, or affects any vote, action or other event or circumstance that would require or permit, conversion of the Series C Preferred Stock to Common Stock or another class or series of capital stock of the Corporation; (c) amend any provision of the Certificate of Incorporation of the Corporation to change, or permit the changing of, (i) the amount payable to holders of Series C Preferred Stock on a Deemed Liquidation Event, the timing or form of such payments or the definition of a Deemed Liquidation Event, or (ii) the triggers, exceptions, or adjustments under Section 4.4 for future issuances of capital stock, in the case of each of this clause and the foregoing clause (i) in a manner adverse to the holders of Series C Preferred Stock in their capacities as such, or (iii) the provisions of this Section 3.3.4; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, at parity with, or junior to the Series C Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse for purposes of the foregoing clauses (i) and (ii); (d) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing, unless any proceeds from such transaction are distributed in accordance with Section 2 to the extent applicable to the holders of Series C Preferred Stock; or (e) increase the authorized number of shares of Series C Preferred Stock.

 

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3.3.5                     Series D Preferred Stock.  At any time when shares of Series D Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series D Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect: (a) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that alters, changes or otherwise affects, in each case adversely, the rights, preferences or privileges of the shares of Series D Preferred Stock but does not similarly alter, change or otherwise affect the rights, preferences or privileges of the other shares of Preferred Stock; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, or at parity with, the Series D Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse; (b) add or amend any provision of the Certificate of Incorporation or the Bylaws of the Corporation that causes or permits, or affects any vote, action or other event or circumstance that would require or permit, conversion of the Series D Preferred Stock to Common Stock or another class or series of capital stock of the Corporation; (c) amend any provision of the Certificate of Incorporation of the Corporation to change, or permit the changing of, (i) the amount payable to holders of Series D Preferred Stock on a Deemed Liquidation Event, the timing or form of such payments or the definition of a Deemed Liquidation Event, or (ii) the triggers, exceptions, or adjustments under Section 4.4 for future issuances of capital stock, in the case of each of this clause and the foregoing clause (i) in a manner adverse to the holders of Series D Preferred Stock in their capacities as such, or (iii) the provisions of this Section 3.3.5; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, at parity with, or junior to the Series D Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse for purposes of the foregoing clauses (i) and (ii); (d) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing, unless any proceeds from such transaction are distributed in accordance with Section 2 to the extent applicable to the holders of Series D Preferred Stock; or (e) increase the authorized number of shares of Series D Preferred Stock.

 

3.3.6                     Series E Preferred Stock.  At any time when shares of Series E Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series E Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect: (a) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that alters, changes or otherwise affects, in each case adversely, the rights, preferences or privileges of the shares of Series E Preferred Stock but does not similarly alter, change or otherwise affect the rights, preferences or privileges

 

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of the other shares of Preferred Stock; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, or at parity with, the Series E Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse; (b) add or amend any provision of the Certificate of Incorporation or the Bylaws of the Corporation that causes or permits, or affects any vote, action or other event or circumstance that would require or permit, conversion of the Series E Preferred Stock to Common Stock or another class or series of capital stock of the Corporation; (c) amend any provision of the Certificate of Incorporation of the Corporation to change, or permit the changing of, (i) the amount payable to holders of Series E Preferred Stock on a Deemed Liquidation Event, the timing or form of such payments or the definition of a Deemed Liquidation Event, or (ii) the triggers, exceptions, or adjustments under Section 4.4 for future issuances of capital stock, in the case of each of this clause and the foregoing clause (i) in a manner adverse to the holders of Series E Preferred Stock in their capacities as such, or (iii) the provisions of this Section 3.3.6; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, at parity with, or junior to the Series E Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse for purposes of the foregoing clauses (i) and (ii); (d) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing, unless any proceeds from such transaction are distributed in accordance with Section 2 to the extent applicable to the holders of Series E Preferred Stock; or (e) increase the authorized number of shares of Series E Preferred Stock.

 

3.3.7                     Series F Preferred Stock.  At any time when shares of Series F Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series F Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect: (a) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that alters, changes or otherwise affects, in each case adversely, the rights, preferences or privileges of the shares of Series F Preferred Stock but does not similarly alter, change or otherwise affect the rights, preferences or privileges of the other shares of Preferred Stock; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, or at parity with, the Series F Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse; (b) add or amend any provision of the Certificate of Incorporation or the Bylaws of the Corporation that causes or permits, or affects any vote, action or other event or circumstance that would require or permit, conversion of the Series F Preferred Stock to Common Stock or another class or series of capital stock of the Corporation; (c) amend any provision of the Certificate of Incorporation of the Corporation to change, or permit the changing of, (i) the amount payable to holders of Series F Preferred Stock on a

 

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Deemed Liquidation Event, the timing or form of such payments or the definition of a Deemed Liquidation Event, or (ii) the triggers, exceptions, or adjustments under Section 4.4 for future issuances of capital stock, in the case of each of this clause and the foregoing clause (i) in a manner adverse to the holders of Series F Preferred Stock in their capacities as such, or (iii) the provisions of this Section 3.3.7; provided, however, that for the sake of clarity, authorization or issuance of capital stock which is senior to, at parity with, or junior to the Series F Preferred Stock with respect to any rights, preferences or privileges (including, without limitation, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends, rights of redemption, voting rights and conversion rights) shall not alone be deemed to be adverse for purposes of the foregoing clauses (i) and (ii); (d) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing, unless any proceeds from such transaction are distributed in accordance with Section 2 to the extent applicable to the holders of Series F Preferred Stock; or (e) increase the authorized number of shares of Series F Preferred Stock.

 

4.                                      Optional Conversion.  The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1                               Right to Convert.

 

4.1.1                     Conversion Ratio.  Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined:  (i) in the instance of the Series A Preferred Stock, by dividing the Series A Original Issue Price by the Series A Conversion Price (as defined below) in effect at the time of conversion; (ii) in the instance of the Series B Preferred Stock, by dividing the Series B Original Issue Price by the Series B Conversion Price (as defined below) in effect at the time of conversion; (iii) in the instance of Series C Preferred Stock, by dividing the Series C Original Issue Price by the Series C Conversion Price (as defined below) in effect at the time of conversion; (iv) in the instance of Series D Preferred Stock, by dividing the Series D Original Issue Price by the Series D Conversion Price (as defined below) in effect at the time of conversion; (v) in the instance of Series E Preferred Stock, by dividing the Series E Original Issue Price by the Series E Conversion Price (as defined below) in effect at the time of conversion; or (vi) in the instance of Series F Preferred Stock, by dividing the Series F Original Issue Price by the Series F Conversion Price (as defined below) in effect at the time of conversion. The “Series A Conversion Price” shall initially be equal to $0.44.  The “Series B Conversion Price” shall initially be equal to $0.55. The “Series C Conversion Price” shall initially be equal to $0.95.  The “Series D Conversion Price” shall initially be equal to $1.25.  The “Series E Conversion Price” shall initially be equal to $1.53.  The “Series F Conversion Price” shall initially be equal to $2.00.  Such initial Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price, and the respective rates at which shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

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4.1.2                     Termination of Conversion Rights.  In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.

 

4.2                               Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board.  Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3                               Mechanics of Conversion.

 

4.3.1                     Notice of Conversion.  In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent.  Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued.  If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing.  The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date.  The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

 

4.3.2                     Reservation of Shares.  The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such

 

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number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.  Before taking any action which would cause an adjustment reducing the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable.

 

4.3.3                     Effect of Conversion.  All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon.  Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock accordingly.

 

4.3.4                     No Further Adjustment.  Upon any such conversion, no adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5                     Taxes.  The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4.  The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

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4.4                               Adjustments to Conversion Prices for Diluting Issues.

 

4.4.1                     Special Definitions.  For purposes of this Article Fourth, the following definitions shall apply:

 

(a)                                 Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)                                 Series F Original Issue Date” shall mean the date on which the first share of Series F Preferred Stock was issued.

 

(c)                                  Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)                                 Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series F Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)                         shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock;

 

(ii)                      shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6, 4.7 or 4.8;

 

(iii)                   shares of Common Stock, Options or Convertible Securities issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board;

 

(iv)                  shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

(v)                     subject to the Exception Cap (defined below), shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property

 

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lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board;

 

(vi)                  securities issued in connection with a registered public offering;

 

(vii)               subject to the Exception Cap (defined below), shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board;

 

(viii)            subject to the Exception Cap (defined below), securities issued in connection with any settlement approved by the Board;

 

(ix)                  subject to the Exception Cap (defined below), shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board;

 

(x)                     subject to the Exception Cap (defined below), securities issued to suppliers of goods or services pursuant to transactions approved by the Board; or

 

(xi)                  securities that are otherwise excluded by consent of (i) the holders of a majority of the outstanding shares of Preferred Stock and, (ii) where the conversion price of a series of Preferred Stock (i.e., the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable) would otherwise have been reduced pursuant to this Section 4.4 as a result of the issuance, or deemed issuance, of such securities, the holders of a majority of the outstanding shares of such series of Preferred Stock.

 

For purposes of the foregoing clauses (v), (vii), (viii), (ix) and (x), the “Exception Cap” means that, as of any given time, the aggregate number of shares of Common Stock issued or deemed

 

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issued as Exempted Securities pursuant to such clauses shall not exceed two and one-half percent (2.5%) of the number of shares of Common Stock then outstanding (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options then outstanding or upon conversion or exchange of Convertible Securities then outstanding, assuming exercise of any outstanding Options therefor).

 

4.4.2                     No Adjustment of Conversion Prices.  No adjustment in the Series A Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series A Preferred Stock, whether before or after the issuance or deemed issuance, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.  No adjustment in the Series B Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series B Preferred Stock, whether before or after the issuance or deemed issuance, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.  No adjustment in the Series C Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series C Preferred Stock, whether before or after the issuance or deemed issuance, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.  No adjustment in the Series D Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series D Preferred Stock, whether before or after the issuance or deemed issuance, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.  No adjustment in the Series E Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series E Preferred Stock, whether before or after the issuance or deemed issuance, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.  No adjustment in the Series F Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series F Preferred Stock, whether before or after the issuance or deemed issuance, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

 

4.4.3                     Deemed Issue of Additional Shares of Common Stock.

 

(a)                                 If the Corporation at any time or from time to time after the Series F Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case

 

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of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)                                 If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such respective Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security.  Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, to an amount which exceeds the lower of (i) the respective Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the respective Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)                                  If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the respective Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the respective Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series F Original Issue Date), are revised after the Series F Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding

 

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automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d)                                 Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price pursuant to the terms of Subsection 4.4.4, the respective Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price shall be readjusted to such Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)                                  If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3).  If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4                     Adjustment of Conversion Prices Upon Issuance of Additional Shares of Common Stock.  In the event the Corporation shall at any time after the Series F Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a

 

25



 

consideration per share less than the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price in effect immediately prior to such issue, then the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

 

CP2 = CP1* (A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(a)                                 “CP2” shall mean the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, in effect immediately after such issue of Additional Shares of Common Stock;

 

(b)                                 “CP1” shall mean the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(c)                                  “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

 

(d)                                 “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

 

(e)                                  “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5                     Determination of Consideration.  For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a)                                 Cash and Property:  Such consideration shall:

 

(i)                         insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

26



 

(ii)                      insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

 

(iii)                   in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board.

 

(b)                                 Options and Convertible Securities.  The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing

 

(i)                         the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)                      the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6                     Multiple Closing Dates.  In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E

 

27



 

Conversion Price or Series F Conversion Price pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price, as applicable, shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5                               Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Series F Original Issue Date effect a subdivision of the outstanding Common Stock, the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding.  If the Corporation shall at any time or from time to time after the Series F Original Issue Date combine the outstanding shares of Common Stock, the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding.  Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.6                               Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Series F Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying each of the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price then in effect by a fraction:

 

(1)                     the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2)                     the denominator of which shall be the total number of shares of Common Stock issued and outstanding

 

28



 

immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) no such adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price shall be made if the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock, as applicable, simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7                               Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Series F Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.8                               Adjustment for Merger or Reorganization, etc.  Subject to the provisions of Subsection 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock, as applicable, immediately prior to such reorganization, recapitalization,

 

29



 

reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

4.9                               Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price or Series F Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion Price and Series F Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock.

 

4.10                        Notice of Record Date.  In the event:

 

(a)                                 the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)                                 of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)                                  of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer,

 

30



 

dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Common Stock.  Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

 

5.                                      Mandatory Conversion.

 

5.1                               Trigger Events.  All outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate(s) upon: (i) the closing of the sale of shares of Common Stock to the public at a per share price equal to at least the Series F Original Issue Price (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in (x) at least $30,000,000 of gross proceeds to the Corporation and (y) a listing of the Common Stock on the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market; (ii) the closing of the sale of shares of Common Stock to the public at a per share price equal to at least the Majority Approved Price (as defined below), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in (x) at least $30,000,000 of gross proceeds to the Corporation and (y) a listing of the Common Stock on the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market; or (iii) the date and time, or the occurrence of an event, specified by the written consent or affirmative vote of the holders of at least a majority of each of (x) the then outstanding shares of Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) as a single class, and (y) the then outstanding shares of each series of Preferred Stock, given in writing or by vote at a meeting, each such series consenting or voting (as the case may be) exclusively and as a separate class.  The time of the closing pursuant to the foregoing clauses (i) or (ii), or the date and time specified or the time of the event specified in any vote or written consent pursuant to the foregoing clause (iii), as applicable, is referred to herein as the “Mandatory Conversion Time.” The “Majority Approved Price” is a price specified by, or a price determined pursuant to a process approved by, the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a single class, with any such price subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock.

 

5.2                               Procedural Requirements.  All holders of record of affected shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5.  Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time.  Upon receipt of such notice, each holder of affected shares of Preferred Stock

 

31



 

shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice.  If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing.  All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2.  As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for affected shares of Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted.  Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

 

6.                                      Redeemed or Otherwise Acquired Shares.  Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred.  Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.

 

7.                                      Waiver.  Except as to those provisions of this Article Fourth for which a different required vote (including, but not limited to, any vote of a particular series of Preferred Stock) or threshold for approval or waiver is expressly provided (in which event such different required vote or threshold for approval or waiver shall apply):  (i) any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein and applicable generally to the Preferred Stock as a class may be waived on behalf of all holders of Preferred Stock by the affirmative written consent or vote of the holders of at least two-thirds (66-2/3%) of the shares of Preferred Stock then outstanding; and (ii) any of the rights, powers, preferences and other terms of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock set forth herein and applicable specifically to such Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock as a series may be waived on behalf of all holders of such series by the affirmative written consent or vote of the holders of a majority of the shares of such series then outstanding.

 

32



 

8.                                      Notices.  Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

FIFTH:  Subject to any additional vote required by the Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

 

SIXTH:  Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

 

SEVENTH:  Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

EIGHTH:  Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide.  The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation.

 

NINTH:  To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.  If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.  Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

TENTH:  To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which the General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.  Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

 

ELEVENTH:  The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity.  An “Excluded Opportunity” is any matter, transaction or

 

33



 

interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

 

TWELFTH:  In connection with repurchases by the Corporation of its Common Stock from employees, officers, directors, advisors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements under which the Corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment, Sections 502 and 503 of the California Corporations Code shall not apply in all or in part with respect to such repurchases.

 

*     *     *

 

3.                                      That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

 

4.                                      That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

 

[The remainder of this page is intentionally left blank]

 

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IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 7th day of October, 2014.

 

 

 

By:

/s/ Randal W. Scott

 

 

Randal W. Scott, Chief Executive Officer

 

SIGNATURE PAGE TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 



EX-3.2(A) 3 filename3.htm

Exhibit 3.2(a)

 

BYLAWS OF

 

INVITAE CORPORATION

 

(f/k/a LOCUS DEVELOPMENT, INC.)

 

Adopted December 7, 2009

 



 

TABLE OF CONTENTS

 

 

Page

ARTICLE I — MEETINGS OF STOCKHOLDERS

1

 

 

 

 

 

1.1

Place of Meetings

1

 

1.2

Annual Meeting

1

 

1.3

Special Meeting

1

 

1.4

Notice of Stockholders’ Meetings

1

 

1.5

Quorum

2

 

1.6

Adjourned Meeting; Notice

2

 

1.7

Conduct of Business

2

 

1.8

Voting

2

 

1.9

Stockholder Action by Written Consent Without a Meeting

3

 

1.10

Record Date for Stockholder Notice; Voting; Giving Consents

4

 

1.11

Proxies

4

 

1.12

List of Stockholder Entitled to Vote

5

 

 

 

 

ARTICLE II — DIRECTORS

 

5

 

 

 

 

 

2.1

Powers

5

 

2.2

Number of Directors

5

 

2.3

Election, Qualification and Term of Office of Directors

5

 

2.4

Resignation and Vacancies

6

 

2.5

Place of Meetings; Meetings by Telephone

6

 

2.6

Conduct of Business

7

 

2.7

Regular Meetings

7

 

2.8

Special Meetings; Notice

7

 

2.9

Quorum; Voting

7

 

2.10

Board Action by Written Consent Without a Meeting

8

 

2.11

Fees and Compensation of Directors

8

 

2.12

Removal of Directors

8

 

 

 

 

ARTICLE III — COMMITTEES

 

8

 

 

 

 

 

3.1

Committees of Directors

8

 

3.2

Committee Minutes

8

 

3.3

Meetings and Actions of Committees

8

 

3.4

Subcommittees

9

 

 

 

 

ARTICLE IV — OFFICERS

 

9

 

 

 

 

 

4.1

Officers

9

 

4.2

Appointment of Officers

9

 

4.3

Subordinate Officers

9

 

4.4

Removal and Resignation of Officers

10

 

4.5

Vacancies in Offices

10

 

4.6

Representation of Shares of Other Corporations

10

 

4.7

Authority and Duties of Officers

10

 

 

 

 

ARTICLE V — INDEMNIFICATION

 

10

 

 

 

 

 

5.1

Indemnification of Directors and Officers in Third Party Proceedings

10

 



 

TABLE OF CONTENTS

(Continued)

 

 

 

 

Page

 

 

 

 

 

5.2

Indemnification of Directors and Officers in Actions by or in the Right of the Company

10

 

5.3

Successful Defense

11

 

5.4

Indemnification of Others

11

 

5.5

Advanced Payment of Expenses

11

 

5.6

Limitation on Indemnification

11

 

5.7

Determination; Claim

12

 

5.8

Non-Exclusivity of Rights

12

 

5.9

Insurance

12

 

5.10

Survival

13

 

5.11

Effect of Repeal or Modification

13

 

5.12

Certain Definitions

13

 

 

 

 

ARTICLE VI — STOCK

13

 

 

 

 

 

6.1

Stock Certificates; Partly Paid Shares

13

 

6.2

Special Designation on Certificates

14

 

6.3

Lost Certificates

14

 

6.4

Dividends

14

 

6.5

Stock Transfer Agreements

14

 

6.6

Registered Stockholders

15

 

6.7

Transfers

15

 

 

 

 

ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER

15

 

 

 

 

 

7.1

Notice of Stockholder Meetings

15

 

7.2

Notice by Electronic Transmission

15

 

7.3

Notice to Stockholders Sharing an Address

16

 

7.4

Notice to Person with Whom Communication is Unlawful

16

 

7.5

Waiver of Notice

16

 

 

 

 

ARTICLE VIII — GENERAL MATTERS

17

 

 

 

 

 

8.1

Fiscal Year

17

 

8.2

Seal

17

 

8.3

Annual Report

17

 

8.4

Construction; Definitions

17

 

 

 

 

ARTICLE IX — AMENDMENTS

17

 

ii



 

BYLAWS

 

ARTICLE I — MEETINGS OF STOCKHOLDERS

 

1.1                               Place of Meetings. Meetings of stockholders of Locus Development, Inc. (the “Company”) shall be held at any place, within or outside the State of Delaware, determined by the Company’s board of directors (the “Board”). The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Company’s principal executive office.

 

1.2                               Annual Meeting. An annual meeting of stockholders shall be held for the election of directors at such date and time as may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting. The Company shall not be required to hold an annual meeting of stockholders, provided that (i) the stockholders are permitted to act by written consent under the Company’s certificate of incorporation and these bylaws, (ii) the stockholders take action by written consent to elect directors and (iii) the stockholders unanimously consent to such action or, if such consent is less than unanimous, all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

 

1.3                               Special Meeting. A special meeting of the stockholders may be called at any time by the Board, Chairperson of the Board, Chief Executive Officer or President (in the absence of a Chief Executive Officer) or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.

 

If any person(s) other than the Board calls a special meeting, the request shall:

 

(i)                                     be in writing;

 

(ii)                                  specify the time of such meeting and the general nature of the business proposed to be transacted; and

 

(iii)                               be delivered personally or sent by registered mail or by facsimile transmission to the Chairperson of the Board, the Chief Executive Officer, the President (in the absence of a Chief Executive Officer) or the Secretary of the Company.

 

The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this section 1.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

 

1.4                               Notice of Stockholders’ Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy

 



 

holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.

 

1.5                               Quorum. Except as otherwise provided by law, the certificate of incorporation or these bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these bylaws.

 

If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, in the manner provided in section 1.6, until a quorum is present or represented.

 

1.6                               Adjourned Meeting; Notice. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and section 1.10 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

 

1.7                               Conduct of Business. Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by the Chief Executive Officer, or in the absence of the foregoing persons by the President, or in the absence of the foregoing persons by a Vice President, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting. The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

 

1.8                               Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of section 1.10 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

 

2



 

Except as may be otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. If authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission (as defined in section 7.2 of these bylaws), provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

 

Except as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation or these bylaws.

 

1.9                               Stockholder Action by Written Consent Without a Meeting. Unless otherwise provided in the certificate of incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

An electronic transmission (as defined in section 7.2) consenting to an action to be taken and transmitted by a stockholder or proxy holder, or by a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for purposes of this section, provided that any such electronic transmission sets forth or is delivered with information from which the Company can determine (i) that the electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (ii) the date on which such stockholder or proxy holder or authorized person or persons transmitted such electronic transmission.

 

In the event that the Board shall have instructed the officers of the Company to solicit the vote or written consent of the stockholders of the Company, an electronic transmission of a stockholder written consent given pursuant to such solicitation may be delivered to the Secretary or the President of the Company or to a person designated by the Secretary or the President. The Secretary or the President of the Company or a designee of the Secretary or the President shall cause any such written consent by electronic transmission to be reproduced in paper form and inserted into the corporate records.

 

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders to take the action

 

3



 

were delivered to the Company as provided in Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

 

1.10                        Record Date for Stockholder Notice; Voting; Giving Consents. In order that the Company may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.

 

If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

 

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of Section 213 of the DGCL and this Section 1.10 at the adjourned meeting.

 

In order that the Company may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in accordance with applicable law. If no record date has been fixed by the Board and prior action by the Board is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.

 

In order that the Company may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

1.11                        Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for

 

4



 

such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

 

1.12                        List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Company’s principal place of business. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

 

ARTICLE II — DIRECTORS

 

2.1                               Powers. The business and affairs of the Company shall be managed by or under the direction of the Board, except as may be otherwise provided in the DGCL or the certificate of incorporation.

 

2.2                               Number of Directors. The Board shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

 

2.3                               Election, Qualification and Term of Office of Directors. Except as provided in section 2.4 of these bylaws, and subject to sections 1.2 and 1.9 of these bylaws, directors shall be elected at each annual meeting of stockholders. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

 

5



 

2.4                               Resignation and Vacancies. Any director may resign at any time upon notice given in writing or by electronic transmission to the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

 

Unless otherwise provided in the certificate of incorporation or these bylaws:

 

(i)                                     Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

 

(ii)                                  Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

 

If at any time, by reason of death or resignation or other cause, the Company should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

 

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

 

A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.

 

2.5                               Place of Meetings; Meetings by Telephone. The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

 

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

6



 

2.6                               Conduct of Business. Meetings of the Board shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

2.7                               Regular Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

 

2.8                               Special Meetings; Notice. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the Secretary or any two directors.

 

Notice of the time and place of special meetings shall be:

 

(i)                                     delivered personally by hand, by courier or by telephone;

 

(ii)                                  sent by United States first-class mail, postage prepaid;

 

(iii)                               sent by facsimile; or

 

(iv)                              sent by electronic mail,

 

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Company’s records.

 

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting.

 

2.9                               Quorum; Voting. At all meetings of the Board, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

 

The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.

 

If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of directors shall refer to a majority or other proportion of the votes of the directors.

 

7


 

2.10                        Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

2.11                        Fees and Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

 

2.12                        Removal of Directors. Unless otherwise restricted by statute, the certificate of incorporation or these bylaws, any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

 

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

 

ARTICLE III — COMMITTEES

 

3.1                               Committees of Directors. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Company. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Company.

 

3.2                               Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

 

3.3                               Meetings and Actions of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

 

(i)                                     section 2.5 (Place of Meetings; Meetings by Telephone);

 

(ii)                                  section 2.7 (Regular Meetings);

 

(iii)                               section 2.8 (Special Meetings; Notice);

 

8



 

(iv)                              section 2.9 (Quorum; Voting);

 

(v)                                 section 2.10 (Board Action by Written Consent Without a Meeting); and

 

(vi)                              section 7.5 (Waiver of Notice)

 

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

 

(i)                                     the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

 

(ii)                                  special meetings of committees may also be called by resolution of the Board; and

 

(iii)                               notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

 

Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these bylaws.

 

3.4                               Subcommittees. Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

 

ARTICLE IV — OFFICERS

 

4.1                               Officers. The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

 

4.2                               Appointment of Officers. The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of section 4.3 of these bylaws.

 

4.3                               Subordinate Officers. The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Company may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

 

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4.4                               Removal and Resignation of Officers. Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

 

Any officer may resign at any time by giving written notice to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party.

 

4.5                               Vacancies in Offices. Any vacancy occurring in any office of the Company shall be filled by the Board or as provided in section 4.3.

 

4.6                               Representation of Shares of Other Corporations. Unless otherwise directed by the Board, the President or any other person authorized by the Board or the President is authorized to vote, represent and exercise on behalf of the Company all rights incident to any and all shares of any other corporation or corporations standing in the name of the Company. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

 

4.7                               Authority and Duties of Officers. Except as otherwise provided in these bylaws, the officers of the Company shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

 

ARTICLE V — INDEMNIFICATION

 

5.1                               Indemnification of Directors and Officers in Third Party Proceedings. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Company) by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

 

5.2                               Indemnification of Directors and Officers in Actions by or in the Right of the Company. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted

 

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by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

 

5.3                               Successful Defense. To the extent that a present or former director or officer of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described in section 5.1 or section 5.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

 

5.4                               Indemnification of Others. Subject to the other provisions of this Article V, the Company shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.

 

5.5                               Advanced Payment of Expenses. Expenses (including attorneys’ fees) incurred by an officer or director of the Company in defending any Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article V or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Company deems appropriate. The right to advancement of expenses shall not apply to any Proceeding for which indemnity is excluded pursuant to these bylaws.

 

5.6                               Limitation on Indemnification. Subject to the requirements in section 5.3 and the DGCL, the Company shall not be obligated to indemnify any person pursuant to this Article V in connection with any Proceeding (or any part of any Proceeding):

 

(i)                                     for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

 

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(ii)                                  for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);

 

(iii)                               for any reimbursement of the Company by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);

 

(iv)                              initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the Company or its directors, officers, employees, agents or other indemnitees, unless (a) the Board authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (c) otherwise required to be made under section 5.7 or (d) otherwise required by applicable law; or

 

(v)                                 if prohibited by applicable law.

 

5.7                               Determination; Claim. If a claim for indemnification or advancement of expenses under this Article V is not paid by the Company or on its behalf within 90 days after receipt by the Company of a written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. To the extent not prohibited by law, the Company shall indemnify such person against all expenses actually and reasonably incurred by such person in connection with any action for indemnification or advancement of expenses from the Company under this Article V, to the extent such person is successful in such action. In any such suit, the Company shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.

 

5.8                               Non-Exclusivity of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.

 

5.9                               Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL.

 

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5.10                        Survival. The rights to indemnification and advancement of expenses conferred by this Article V shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

5.11                        Effect of Repeal or Modification. Any amendment, alteration or repeal of this Article V shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to such amendment, alteration or repeal.

 

5.12                        Certain Definitions. For purposes of this Article V, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article V, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Companyas referred to in this Article V.

 

ARTICLE VI — STOCK

 

6.1                               Stock Certificates; Partly Paid Shares. The shares of the Company shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate in bearer form.

 

The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company shall declare

 

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a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 

6.2                               Special Designation on Certificates. If the Company is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or series of stock; provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Company shall issue to represent such class or series of stock, a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section 6.2 or Sections 156, 202(a) or 218(a) of the DGCL or with respect to this section 6.2 a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

 

6.3                               Lost Certificates. Except as provided in this section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Company and cancelled at the same time. The Company may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

 

6.4                               Dividends. The Board, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the Company’s capital stock. Dividends may be paid in cash, in property, or in shares of the Company’s capital stock, subject to the provisions of the certificate of incorporation.

 

The Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

 

6.5                               Stock Transfer Agreements. The Company shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

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6.6                               Registered Stockholders. The Company:

 

(i)                                     shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

 

(ii)                                  shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

 

(iii)                               shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

6.7                               Transfers. Transfers of record of shares of stock of the Company shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.

 

ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER

 

7.1                               Notice of Stockholder Meetings. Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Company’s records. An affidavit of the Secretary or an Assistant Secretary of the Company or of the transfer agent or other agent of the Company that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

7.2                               Notice by Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the Company under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any such consent shall be deemed revoked if:

 

(i)                                     the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent; and

 

(ii)                                  such inability becomes known to the Secretary or an Assistant Secretary of the Company or to the transfer agent, or other person responsible for the giving of notice.

 

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

Any notice given pursuant to the preceding paragraph shall be deemed given:

 

(i)                                     if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

 

(ii)                                  if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

 

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(iii)                               if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

 

(iv)                              if by any other form of electronic transmission, when directed to the stockholder.

 

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

 

Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

 

7.3                               Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.

 

7.4                               Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

7.5                               Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

 

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ARTICLE VIII — GENERAL MATTERS

 

8.1                               Fiscal Year. The fiscal year of the Company shall be fixed by resolution of the Board and may be changed by the Board.

 

8.2                               Seal. The Company may adopt a corporate seal, which shall be in such form as may be approved from time to time by the Board. The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 

8.3                               Annual Report. The Company shall cause an annual report to be sent to the stockholders of the Company to the extent required by applicable law. If and so long as there are fewer than 100 holders of record of the Company’s shares, the requirement of sending an annual report to the stockholders of the Company is expressly waived (to the extent permitted under applicable law).

 

8.4                               Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

 

ARTICLE IX — AMENDMENTS

 

These bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the Company may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

 

A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board.

 

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EX-4.2 4 filename4.htm

Exhibit 4.2

 

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT is made as of August 26, 2014, by and among Invitae Corporation, a Delaware corporation (the “Company”), and each of the investors listed on Schedule A hereto, referred to hereinafter as the “Investors” and each individually as an “Investor.”

 

RECITALS

 

WHEREAS, certain of the Investors (the “Series F Investors”) are purchasing shares of the Company’s Series F Preferred Stock, $0.0001 par value per share (the “Series F Preferred Stock”), pursuant to that certain Series F Preferred Stock Purchase Agreement of even date herewith (the “Purchase Agreement”);

 

WHEREAS, certain of the Investors are (i) holders of the Company’s Series A Preferred Stock, $0.0001 par value per share (the “Series A Preferred Stock”), Series B Preferred Stock, $0.0001 par value per share (the “Series B Preferred Stock”), Series C Preferred Stock, $0.0001 par value per share (the “Series C Preferred Stock”), Series D Preferred Stock, $0.0001 par value per share (the “Series D Preferred Stock”) or Series E Preferred Stock, $0.0001 par value per share (the “Series E Preferred Stock”), and (ii) parties, together with the Company, to a Fourth Amended and Restated Investors’ Rights Agreement dated as of October 17, 2013 (the “Prior Agreement”); and

 

WHEREAS, in order to induce the Series F Investors to enter into the Purchase Agreement and consummate the purchase and sale of Series F Preferred Stock contemplated thereby, upon delivery of executed signature pages to this Agreement by (i) the Company, (ii) the holders of a majority of the Registrable Securities then outstanding (for this purpose, as defined in the Prior Agreement and determined as of immediately prior to the date hereof) and (iii) the Series F Investors participating in the Initial Closing (as defined in the Purchase Agreement), this Agreement shall supersede and replace the Prior Agreement.

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1.                    Definitions.  For purposes of this Agreement: “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

Common Stock” means shares of the Company’s common stock, $0.0001 par value per share.

 

Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final

 

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prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein 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 indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) 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 (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

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

 

GAAP” means generally accepted accounting principles in the United States.

 

Holder” means any holder of Registrable Securities who is a party to this Agreement.

 

Immediate Family Member” means a 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, including adoptive relationships, of a natural person referred to herein.

 

Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

 

Key Employee” means any executive-level employee (including division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).

 

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Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds at least 500,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof).

 

New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities; provided, however, that shares of Series F Preferred Stock sold pursuant to the Purchase Agreement as it may be amended from time to time are excluded from this definition.

 

Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

Preferred Stock” means, collectively, shares of the Series A Preferred Stock, shares of the Series B Preferred Stock, shares of the Series C Preferred Stock, shares of the Series D Preferred Stock, shares of the Series E Preferred Stock and shares of the Series F Preferred Stock.

 

Registrable Securities” means the following:  (i) the Common Stock issuable or issued upon conversion of the Preferred Stock; and (ii) any Common Stock 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 clause (i) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.13 of this Agreement.

 

Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.12(b) hereof.

 

SEC” means the Securities and Exchange Commission.

 

SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

 

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of

 

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counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6.

 

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

 

2.1                               Demand Registration.

 

(a)                                 Form S-1 DemandIf at any time after the earlier of (i) three (3) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of twenty-five percent (25%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to the Registrable Securities then outstanding if the anticipated aggregate offering price, net of Selling Expenses, is not less than $5 million, then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1 (c) and (d) and Section 2.3.

 

(b)                                 Form S-3 DemandIf at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least ten percent (10%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $2 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1 (c) and (d) and Section 2.3.

 

(c)                                  Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors (the “Board”) it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such

 

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filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than sixty (60) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such sixty (60) day period other than an Excluded Registration.

 

(d)                                 The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b).  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b) (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request.  A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d).

 

2.2                               Company Registration.  If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration.  Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration.  The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

 

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2.3                               Underwriting Requirements.

 

(a)                                 If, pursuant to Section 2.1, 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 Section 2.1, and the Company shall include such information in the Demand Notice.  The underwriter(s) will be selected by the Initiating Holders, subject only to the reasonable approval of the Company.  In such event, the right of any Holder to include such Holder’s 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 to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting.  Notwithstanding any other provision of this Section 2.3, if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

 

(b)                                 In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company.  If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine 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, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering.  If 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 allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.  Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the

 

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number of Registrable Securities included in the offering be reduced below twenty-five percent (25%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering.  For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members 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 number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

(c)                                  For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

2.4                               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 its 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; provided, however, that such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;

 

(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 Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)                                  furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)                                 use its 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 selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of

 

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process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(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 underwriter(s) of such offering;

 

(f)                                   use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

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

 

(h)                                 promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

(i)                                     notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

(j)                                    after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

2.5                               Furnish Information.  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 is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6                               Expenses of Registration.  All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $30,000, of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the

 

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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 selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall 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 after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b).  All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

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

 

2.8                               Indemnification.  If 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 selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

(b)                                 To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and 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 Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written

 

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information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

(c)                                  Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof.  The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and 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 action.  The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action.  The failure to give 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 2.8.

 

(d)                                 To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the

 

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untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of 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; provided, however, that, in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(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)                                   Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

 

2.9                               Reports Under Exchange Act.  With a view to making available to the Holders the benefits of SEC 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 shall:

 

(a)                                 make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b)                                 use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)                                  furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company 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 the Company 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

 

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Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

2.10                        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 then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would provide to such holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Section 6.10.

 

2.11                        “Market Stand-off” Agreement.  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 final prospectus relating to the registration by the Company for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed (x) one hundred eighty (180) days in the case of the IPO, or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto) or (y) ninety (90) days in the case of any registration other than the IPO, or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), (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 (directly or indirectly) 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 such securities, 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 foregoing provisions of this Section 2.11:  (a) shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement; (b) with respect to the IPO, shall be applicable to the Holders only if all officers and directors of the Company and all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock) are subject to the same restrictions; (c) with respect to

 

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any registration other than the IPO, shall only be applicable to directors and officers of the Company and their respective Affiliates, and then only if all officers and directors of the Company are subject to the same restrictions; and (d) shall not be applicable with respect to shares of Common Stock acquired in the IPO, in any registration other than the IPO or in the open market after effectiveness of the registration statement for the IPO or any registration other than the IPO, provided that with respect to any sales or other arrangements involving shares of Common Stock during any applicable lock-up period, no filing under the Exchange Act or otherwise or any public announcement by the Holder or any director of the Company affiliated with such Holder shall be required or shall be voluntarily made in connection therewith, other than any required beneficial ownership filings under Section 13 of the Exchange Act.  The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 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 connection with such registration that are consistent with this Section 2.11 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 pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.

 

2.12                        Restrictions on Transfer.

 

(a)                                 The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act.  A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

(b)                                 Each certificate or instrument representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c)) be stamped or otherwise imprinted with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT

 

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BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12.

 

(c)                                  The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2.  Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer.  Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company.  The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 2.12.  Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(b), except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

2.13                        Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:

 

(a)                                 the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation; and

 

(b)                                 the fifth anniversary of the IPO.

 

3.                    Information and Observer Rights.

 

3.1                               Delivery of Financial Statements.  The Company shall deliver to each Major Investor:

 

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(a)                                 as soon as practicable, but in any event within one hundred fifty (150) days after the end of each fiscal year of the Company, (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined in Section 3.1(e)) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements to be audited and certified by independent public accountants of nationally recognized standing selected by the Board;

 

(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, unaudited statements of income and of cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP);

 

(c)                                  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, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company, and certified by the chief financial officer or chief executive officer of the Company as being true, complete, and correct;

 

(d)                                 as soon as practicable, but in any event within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows for such month, and an unaudited balance sheet and statement of stockholders’ equity as of the end of such month, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP);

 

(e)                                  as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), approved by the Board and prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company;

 

(f)                                   with respect to the financial statements called for in Section 3.1(a), Section 3.1(b) and Section 3.1(d), an instrument executed by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (except as

 

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otherwise set forth in Section 3.1(b) and Section 3.1(d)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein; and

 

(g)                                  such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Section 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

 

Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date thirty (30) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

 

3.2                               Inspection.  The Company shall permit each Major Investor at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably 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 (i) that it reasonably and in good faith considers to be a trade secret, (ii) confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company), or (iii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

3.3                               Termination of Information.  The covenants set forth in Section 3.1 and Section 3.2 shall terminate and be of no further force or effect upon the earliest of:  (i) immediately before the consummation of the IPO, or (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, pursuant to which the Investors receive only cash and/or marketable securities.

 

3.4                               Confidentiality.  Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.4 by such Investor), (b) is or has been

 

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independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.4; (iii) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

 

3.5                               Observer Rights.

 

(a)                                 As long as Thomas, McNerney & Partners II, L.P. together with its affiliates (collectively, “TMP”) holds at least fifty percent (50%) of the shares of Series A Preferred Stock purchased by TMP from the Company, the Company shall invite a representative of TMP to attend all meetings of the Board in a non-voting capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided that such representative shall agree to hold in confidence and trust all information so provided; and provided further that the Company reserves the right to exclude such representative from access to any of such materials or meetings or portions thereof if and to the extent that (i) in the good faith judgment of a majority of the directors of the Company after obtaining the advice of counsel such exclusion is reasonably necessary to preserve the attorney-client privilege, (ii) in the good faith judgment of a majority of the directors of the Company, such access would materially impair the due consideration by the Board of any matter, or (iii) any third party has, with respect to materials or information to be distributed to or considered by the Board, requested or required that such information not be shared beyond a group which does not include such representative.  The Company shall reimburse such TMP representative for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board.

 

(b)                                 With respect to any Holder of Series C Preferred Stock originally purchased from the Company (an “Original Series C Investor”) which continues to hold (together with its Affiliates) at least 2,000,000 shares of Series C Preferred Stock (as adjusted for stock splits, recapitalizations, etc.), other than TMP (which is addressed in Section 3.5(a) above) as well as any other Original Series C Investor for so long as such Original Series C Investor has the right (considered together with its Affiliates and whether pursuant to a contractual right, ownership of the requisite shares, or otherwise) to have its nominee elected to the Board, the Company shall invite a representative of such Original Series C Investor to attend all meetings of the Board in a non-voting capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, that such representative shall agree to hold in confidence and trust all information so provided; provided, further, that the

 

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Company reserves the right to exclude such representative from access to any of such materials or meetings or portions thereof if and to the extent that (i) in the good faith judgment of a majority of the directors of the Company after obtaining the advice of counsel such exclusion is reasonably necessary to preserve the attorney-client privilege, (ii) in the good faith judgment of a majority of the directors of the Company, such access would materially impair the due consideration by the Board of any matter, or (iii) any third party has, with respect to materials or information to be distributed to or considered by the Board, requested or required that such information not be shared beyond a group which does not include such representative; and provided, finally, that the rights of any such holder pursuant to this Section 3.5(b) shall terminate in the event of any of the following:  (x) such Original Series C Investor (considered for this purpose together with all of its Affiliates) fails to participate in each additional financing of the Company on a pro rata basis (assuming and/or to the extent that such participation is made available to such Original Series C Investor with advance notice and a reasonable opportunity to participate, and “pro rata basis” is determined approximately in accordance with Section 4); or (y) an IPO.

 

(c)                                  With respect to the Wellington Investors (defined below), as long as the Wellington Investors hold at least fifty percent (50%) of the shares of Series F Preferred Stock purchased from the Company, the Company shall invite one representative of the Wellington Investors to attend all meetings of the Board in a non-voting capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, that such representative shall agree to hold in confidence and trust all information so provided; provided, further, that the Company reserves the right to exclude such representative from access to any of such materials or meetings or portions thereof if and to the extent that (i) in the good faith judgment of a majority of the directors of the Company after obtaining the advice of counsel such exclusion is reasonably necessary to preserve the attorney-client privilege, (ii) in the good faith judgment of a majority of the directors of the Company, such access would materially impair the due consideration by the Board of any matter, or (iii) any third party has, with respect to materials or information to be distributed to or considered by the Board, requested or required that such information not be shared beyond a group which does not include such representative; and provided, finally, that the rights of any such holder pursuant to this Section 3.5(c) shall terminate in the event of an IPO.

 

4.                    Rights to Future Stock Issuances.

 

4.1                               Right of First Offer.  Subject to the terms and conditions of this Section 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Major Investor.  A Major Investor shall be entitled to apportion the right of first offer hereby granted to it among itself and its Affiliates in such proportions as it deems appropriate.

 

(a)                                 The Company shall give notice (the “Offer Notice”) to each Major Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

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(b)                                 By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by such Major Investor bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Stock and other Derivative Securities). At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Major Investor’s failure to do likewise.  During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major Investors were entitled to subscribe but that were not subscribed for by the Major Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares.  The closing of any sale pursuant to this Section 4.1(b) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 4.1(c).

 

(c)                                  If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 4.1(b), the Company may, during the ninety (90) day period following the expiration of the periods provided in Section 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice.  If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Section 4.1.

 

(d)                                 The right of first offer in this Section 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Company’s Certificate of Incorporation), except that for purposes of this Section 4.1(d), Exempted Securities shall not include securities that are otherwise excluded from the anti-dilution provisions of the Company’s Certificate of Incorporation by consent of the holders of a majority of the outstanding Preferred Stock and thus considered Exempted Securities under the Company’s Certificate of Incorporation (i.e., pursuant to Section 4.4.1(d)(xi) of Part B of Article Fourth of the Company’s Certificate of Incorporation as in effect on the date hereof); and (ii) shares of Common Stock issued in the IPO.

 

(e)                                  Notwithstanding any provision hereof to the contrary, in lieu of complying with the provisions of this Section 4.1, the Company may elect to give notice to the Major Investors within thirty (30) days after the issuance of New Securities.  Such notice shall

 

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describe the type, price, and terms of the New Securities.  Each Major Investor shall have twenty (20) days from the date notice is given to elect to purchase up to the number of New Securities that would, if purchased by such Major Investor, maintain such Major Investor’s percentage-ownership position, calculated as set forth in Section 4.1(b) before giving effect to the issuance of such New Securities.  The closing of such sale shall occur within sixty (60) days of the date notice is given to the Major Investors.

 

4.2                               Termination.  The covenants set forth in Section 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, whichever event occurs first.

 

5.                    Additional Covenants.

 

5.1                               Insurance.  Unless waived by the Board, the Company shall use its commercially reasonable efforts to maintain, with financially sound and reputable insurers, Directors and Officers liability insurance and term “key-person” insurance on Randal W. Scott, each in an amount and on terms and conditions satisfactory to the Board.  The key-person policy shall name the Company as loss payee, and neither policy shall be cancelable by the Company without prior approval by the Board.

 

5.2                               Employee Agreements.  The Company will cause each person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure and proprietary rights assignment agreement.  In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any restricted stock agreement between the Company and any employee, without the consent of the Board.

 

5.3                               Employee Stock.  Unless otherwise approved by the Board, all future employees and consultants of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, and (ii) a market stand-off provision substantially similar to that in Section 2.11.  In addition, unless otherwise approved by the Board, the Company shall retain a “right of first refusal” on employee transfers until the Company’s IPO and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.

 

5.4                               Board Matters.  Unless otherwise determined by the vote of a majority of the directors then in office, the Board shall meet at least quarterly in accordance with an agreed-upon schedule.  The Company shall reimburse the nonemployee directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board.  The Company shall cause to be established, as soon as

 

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practicable after such request, and will maintain, an audit and compensation committee, each of which shall consist solely of non-management directors.  Each non-employee director shall be entitled in such person’s discretion to be a member of any Board committee.

 

5.5                               Successor Indemnification.  If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, its Certificate of Incorporation, or elsewhere, as the case may be.

 

5.6                               Termination of Covenants.  The covenants set forth in this Section 5, except for Section 5.5, shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act or (iii) upon a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, whichever event occurs first.

 

6.                    Miscellaneous.

 

6.1                               Successors and Assigns.  The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least 250,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11.  For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement.  The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

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6.2                               Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

 

6.3                               Counterparts; Facsimile.  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.  This Agreement may also be executed and delivered by facsimile signature and 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.

 

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

 

6.5                               Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s 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) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5.  If notice is given to the Company, a copy shall also be sent to Mike Hird, Pillsbury Winthrop Shaw Pittman LLP, 12255 El Camino Real, Suite 300, San Diego, CA 92130-4088, Fax: (858) 509-4010.

 

6.6                               Amendments and Waivers.  Any term of this Agreement 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 then outstanding; provided that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party.  Notwithstanding the foregoing: (a) this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion, it being agreed that a waiver, amendment or termination of the provisions of Section 4 with respect to a particular transaction or financing shall be deemed to apply to all Investors in the same fashion if such waiver, amendment or termination does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction or financing; provided, however, that if any Investor, individually or together with such Investor’s Affiliates, holding at least 2,500,000 shares of Registrable Securities (as adjusted for any stock

 

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split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof) is allowed to participate in any such transaction or financing, then each other Investor, individually or together with such Investor’s Affiliates, holding at least 2,500,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof) will be offered the opportunity to participate on the same basis (although proportionate to their respective holdings of Registrable Securities); (b) the provisions of Section 6.9 may not be amended or waived without the prior written consent of the Wellington Investors holding a majority of the Registrable Securities then outstanding and held by the Wellington Investors; and (c) the proviso in the foregoing clause (a) regarding participation in financings may not be amended without the consent of each Investor holding (together with its Affiliates) at least 2,500,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof).  The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver.  Any amendment, termination, or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto.  No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

6.7                               Severability.  In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

6.8                               Aggregation of Stock.  All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement (including, without limitation, status as a Major Investor) and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

6.9                               Wellington.  Notwithstanding any provision herein to the contrary:  (a) each “Wellington Investor” (meaning an Investor that is an advisory or subadvisory client of Wellington Management Company, LLP, and any affiliated or successor investment advisor or subadvisor thereof to the Wellington Investors, or a transferee of Registrable Securities held by such an Investor) shall be deemed to be an Affiliate of each other Wellington Investor; and (b) an entity that is an Affiliate of a Wellington Investor shall not, solely by virtue thereof, be deemed to be an Affiliate of any other Wellington Investor unless such entity is a Wellington Investor (and, for the avoidance of doubt, an Affiliate of such entity shall not be deemed an Affiliate of any Wellington Investor solely by virtue of being an Affiliate of such entity).

 

6.10                        Additional Investors.  Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Preferred Stock after the date hereof, whether pursuant to the Purchase Agreement or otherwise, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an

 

23



 

additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder.  No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.

 

6.11                        Entire Agreement.  This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

6.12                        Costs of Enforcement.  If any party to this Agreement seeks to enforce its rights under this Agreement by legal proceedings, the non-prevailing party shall pay all costs and expenses incurred by the prevailing party, including, without limitation, all reasonable attorneys’ fees.

 

6.13                        Delays or Omissions.  No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

6.14                        Acknowledgment.  The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company.  Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

 

6.15                        Prior Agreement SupersededUpon delivery of executed signature pages to this Agreement by: (i) the Company; (ii) the holders of a majority of the Registrable Securities then outstanding (for this purpose, as defined in the Prior Agreement and determined as of immediately prior to the date hereof); and (iii) the Series F Investors participating in the Initial Closing (as defined in the Purchase Agreement), this Agreement shall supersede and replace the Prior Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

24



 

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

 

 

COMPANY:

 

 

 

INVITAE CORPORATION

 

 

 

 

 

By:

/s/ Randal W. Scott

 

 

Randal W. Scott

 

 

Chief Executive Officer

 

 

 

Address:

 

 

 

458 Brannan Street

 

San Francisco, CA 94107

 

Facsimile: (415) 520-9486

 

E-mail: randy.scott@invitae.com

 

[Signature Page to Investors’ Rights Agreement]

 



EX-4.3 5 filename5.htm

Exhibit 4.3

 

OMNIBUS APPROVAL AND AMENDMENT

 

WITH RESPECT TO:

 

·                                          SERIES F PREFERRED STOCK PURCHASE AGREEMENT;

 

·                                          FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT; AND

 

·                                          FIFTH AMENDED AND RESTATED VOTING AGREEMENT

 

This Omnibus Approval and Amendment (this “Amendment”) is entered into as of October     , 2014 (the “Effective Date”), by and among Invitae Corporation, a Delaware corporation (the “Company”), and the following parties:

 

·                  with respect to that certain Series F Preferred Stock Purchase Agreement (the “Purchase Agreement”), dated as of August 26, 2014, by and among the Company and the “Purchasers” party thereto, the undersigned holders of Series F Preferred Stock which, collectively, represent a Majority-In-Interest (as contemplated by Section 6.9 of the Purchase Agreement for purposes of determining the requisite approvals necessary to amend and/or waive terms of the Purchase Agreement);

 

·                  with respect to that certain Fifth Amended and Restated Investors’ Rights Agreement (the “Investors’ Rights Agreement”), dated as of August 26, 2014, by and among the Company and the “Investors” party thereto, the undersigned stockholders which, collectively, represent the holders of a majority of the outstanding Registrable Securities (with such capitalized terms having the meaning set forth in the Investor’s Rights Agreement and as contemplated by Section 6.6 of the Investor’s Rights Agreement for purposes of determining the requisite approvals necessary to amend and/or waive terms of the Investor’s Rights Agreement);

 

·                  with respect to that certain Fifth Amended and Restated Voting Agreement (the “Voting Agreement”), dated as of August 26, 2014, by and among the Company and the “Stockholders” party thereto, the undersigned stockholders which, collectively, represent the holders of a majority of the shares of Common Stock issued or issuable upon conversion of the shares of Preferred Stock held by the Investors (voting as a single class and on an as converted basis) (with such capitalized terms having the meaning set forth in the Voting Agreement and as contemplated by Section 5.8 of the Voting Agreement for purposes of determining the requisite approvals necessary to amend and/or waive terms of the Voting Agreement); and

 

·                  The entities identified as “Subsequent Purchasers” on Schedule A hereto, whereby each such Subsequent Purchaser is participating in the final Subsequent Closing of the sale and issuance of Series F Preferred Stock pursuant to the Purchase Agreement, as amended hereby (the “Final Closing”).

 

This Amendment is entered into with reference to the following facts:

 



 

A.                                    Capitalized terms that are used but are not otherwise defined herein shall have the meaning ascribed to such term in the Purchase Agreement.

 

B.                                    The Company and certain investors (including the Majority-In-Interest) are parties to the Purchase Agreement pursuant to which the Company has, prior to the Effective Date, issued and sold 24,500,000 shares of Series F Preferred Stock as part of the Initial Closing.

 

C.                                    The Company and certain stockholders of the Company are parties to: (i) the Investors’ Rights Agreement; (ii) Voting Agreement; and (iii) the Fifth Amended and Restated Right of First Refusal and Co-Sale Agreement (together with the Purchase Agreement, the Investors’ Rights Agreement and the Voting Agreement, the “Transaction Documents”).

 

D.                                    Prior to the issuance of shares of Series F Preferred Stock to the Subsequent Purchasers, the Restated Certificate is being amended and restated pursuant to an Amended and Restated Certificate of Incorporation in substantially the form attached hereto as Exhibit A (the “Amended and Restated Charter”) to, among other things: (i) increase the total number of shares of Common Stock authorized to be issued by 25,000,000 shares (i.e., from 135,131,524 shares to 160,131,524 shares); (ii) increase the total number of shares of Preferred Stock (as defined in the Restated Certificate) authorized to be issued by 25,000,000 shares (i.e., from 116,131,524 shares to 141,131,524 shares); and (iii) increase the total number of shares of Series F Preferred Stock authorized to be issued by 25,000,000 shares (i.e., from 35,000,000 shares to 60,000,000 shares).

 

E.                                     The parties hereto desire to: (i) provide for the issuance and sale pursuant to the Purchase Agreement as amended hereby of an additional 25,000,000 shares of Series F Preferred Stock for a total issuance and sale, pursuant to the Purchase Agreement, of 60,000,000 shares of Series F Preferred Stock (which is an increase beyond the maximum amount of up to 35,000,000 shares of Series F Preferred Stock originally contemplated by the Purchase Agreement); (ii) amend the Investors’ Rights Agreement and the Voting Agreement as provided herein in connection with issuance and sale of such additional shares of Series F Preferred Stock; (iii) confirm that the Subsequent Purchasers are parties to the Transaction Documents (as amended hereby) as purchasers of Series F Preferred Stock pursuant to the Purchase Agreement; (iv) amend and/or waive the terms and provisions of the Purchase Agreement (as well as any terms and provisions of the other Transaction Documents) to the extent necessary to provide for the issuance and sale of the Series F Preferred Stock contemplated hereby; and (v) confirm their consent and approval for all actions necessary or appropriate for the Company to provide for and implement the arrangements contemplated by the foregoing clauses (i), (ii), (iii) and (iv).

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                      Issuance as Part of Final Closing.  The issuance and sale to the Subsequent Purchasers as part of the Final Closing pursuant to the Purchase Agreement as amended hereby of 35,500,000 shares of Series F Preferred Stock for a total issuance and sale, pursuant to the Purchase Agreement, of 60,000,000 shares of Series F Preferred Stock (which is an increase beyond the maximum amount of up to 35,000,000 shares of Series F Preferred Stock originally contemplated by the Purchase Agreement) is hereby ratified, confirmed and approved.

 

2



 

2.                                      Parties to Transaction Documents; Signature Pages; Representations and Warranties.

 

(a)                                 The Subsequent Purchasers are intended for all purposes to be parties to the Transaction Documents as amended hereby as purchasers of Series F Preferred Stock pursuant to the Purchase Agreement (and as contemplated, respectively, by each of the other Transaction Documents).

 

(b)                                 Upon delivery of executed signature pages to each of the Transaction Documents, each of the Subsequent Purchasers shall be considered a “Purchaser” as such term is defined in and under the Purchase Agreement and an “Investor” as such term is defined in and under the other Transaction Documents; accordingly, each of the Subsequent Purchasers shall be entitled to the applicable rights and privileges, and be bound by the applicable obligations, all as set forth in each of the respective Transaction Documents as amended hereby.

 

(c)                                  The Company hereby represents and warrants to the Subsequent Purchasers that, except as set forth on the Disclosure Schedule as well as any supplement to the Disclosure Schedule delivered to the Subsequent Purchasers pursuant to Section 3(c) hereof, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the representations and warranties of the Company contained in Sections 2.1 through 2.30 of the Purchase Agreement are true and complete as of the date of the Final Closing (except those representations and warranties which address matters only as of a particular date, which shall have been true and correct in all respects only as of such particular date).

 

3.                                      Conditions to Subsequent Purchaser’s Obligations at Final Closing.  The obligations of each Subsequent Purchaser to purchase the Shares at the Final Closing are subject to the fulfillment, on or before the Final Closing, of each of the following conditions, unless otherwise waived:

 

(a)                                 Representations and Warranties. The representations and warranties of the Company contained in Sections 2.1 through 2.30 of the Purchase Agreement shall be true and correct in all respects as of the Final Closing (except those representations and warranties which address matters only as of a particular date, which shall have been true and correct in all respects only as of such particular date), in each case as qualified by the information contained in the Disclosure Schedule as well as any supplement to the Disclosure Schedule delivered to the Subsequent Purchasers pursuant to Section 3(c) hereof.

 

(b)                                 Amended and Restated Charter.  The Company shall have filed the Amended and Restated Charter with the Secretary of State of the State of Delaware.

 

(c)                                  Officer’s Certificate.  The Chief Executive Officer of the Company shall deliver to the Subsequent Purchasers a certificate certifying that the representations and warranties of the Company contained in Section 2 of the Purchase Agreement are true and correct in all respects as of the Final Closing (except those representations and warranties which address matters only as of a particular date, which shall have been true and correct in all respects only as of such particular date), in each case as qualified by the information contained in the Disclosure

 

3



 

Schedule as well as any supplement to the Disclosure Schedule that accompanies such certificate.

 

(d)                                 Secretary’s Certificate. The Secretary of the Company shall have delivered to Subsequent Purchasers at the Final Closing a certificate certifying (i) the Bylaws of the Company, (ii) resolutions of the Board of the Company approving the transactions contemplated by this Amendment, and (iii) resolutions of the stockholders of the Company approving the Amended and Restated Charter.

 

(e)                                  Opinion of Company Counsel.  Such Subsequent Purchaser shall have received from Pillsbury Winthrop Shaw Pittman LLP, counsel for the Company, an opinion, dated as of the Final Closing, in substantially the form of Exhibit G attached to the Purchase Agreement, updated to account for the issuance of Series F Preferred Stock that took place at the Initial Closing.

 

(f)                                   Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Final Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Subsequent Purchasers, and the Subsequent Purchasers (or their counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates.

 

4.              Amendments to Investor’s Rights Agreement.

 

(a)                                 Effective upon the Final Closing, Section 2.1(a) of the Investors’ Rights Agreement is hereby amended and restated as follows:

 

“(a)                           Form S-1 DemandIf at any time after the earlier of (i) eighteen (18) months after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of twenty percent (20%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to the Registrable Securities then outstanding if the anticipated aggregate offering price, net of Selling Expenses, is not less than $5 million, then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1 (c) and (d) and Section 2.3.”

 

(b)                                 Effective upon the Final Closing, Section 2.13 of the Investors’ Rights Agreement is hereby amended and restated as follows:

 

4



 

“2.13                  Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:

 

(a)                                 the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, and distribution of proceeds to or escrow for the benefit of the Holders in accordance with the Company’s Certificate of Incorporation in effect immediately prior to such transaction; and

 

(b)                                 the seventh anniversary of the IPO.

 

(c)                                  Effective upon the Final Closing, clause (iii) of Section 3.3 of the Investors’ Rights Agreement are hereby amended and restated as follows:

 

“(iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, pursuant to which the Investors receive only cash and/or marketable securities, and distribution of proceeds to or escrow for the benefit of the Holders in accordance with the Company’s Certificate of Incorporation in effect immediately prior to such transaction.”

 

(d)                                 Effective upon the Final Closing, a new Section 3.5(d) is added to the Investors’ Rights Agreement as follows:

 

“(d)                           As long as BlackRock, Inc., together with its affiliates (collectively, “BlackRock”), holds at least fifty percent (50%) of the shares of Series F Preferred Stock purchased by BlackRock from the Company, the Company shall invite a representative of BlackRock to attend all meetings of the Board and its audit committee in a non-voting capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided that the Company reserves the right to exclude such representative from access to any of such materials or meetings or portions thereof if and to the extent that (i) in the good faith judgment of a majority of the directors of the Company after obtaining the advice of counsel such exclusion is reasonably necessary to preserve the attorney-client privilege, (ii) in the good faith judgment of a majority of the directors of the Company, such access would materially impair the due consideration by the Board of any matter, or (iii) any third party has, with respect to materials or information to be distributed to or considered by the Board, requested or required that such information not be shared beyond a group which does not include such representative.  BlackRock, Inc. shall cause such representative to hold in confidence all information provided under this Section 3.5(d) to the same extent an Investor is required to keep information obtained by it hereunder confidential pursuant to the provisions of Section 3.4.  Upon request, the Company shall exercise commercially reasonable efforts to provide BlackRock’s designated representative with the ability to attend meetings of the Board and its audit committee by telephone.

 

5



 

(e)                                  Effective upon the Final Closing, Section 4.1(d) of the Investors’ Rights Agreement is hereby amended and restated as follows:

 

“(d)                           The right of first offer in this Section 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Company’s Certificate of Incorporation), except that for purposes of this Section 4.1(d), Exempted Securities shall not include securities that are otherwise excluded from the anti-dilution provisions of the Company’s Certificate of Incorporation by consent of the requisite holders of Preferred Stock pursuant to Section 4.4.1(d)(xi) of Part B of Article Fourth of the Company’s Certificate of Incorporation as in effect on the date hereof and thus considered Exempted Securities under the Company’s Certificate of Incorporation; and (ii) shares of Common Stock issued in the IPO.”

 

(f)                                   Effective upon the Final Closing, clause (iii) of Section 4.2 of the Investors’ Rights Agreement is hereby amended and restated as follows:

 

“(iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, and distribution of proceeds to or escrow for the benefit of the Holders in accordance with the Company’s Certificate of Incorporation in effect immediately prior to such transaction, whichever event occurs first.”

 

(g)                                  Effective upon the Final Closing, clause (iii) of Section 5.6 of the Investors’ Rights Agreement is hereby amended and restated as follows:

 

“(iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, and distribution of proceeds to or escrow for the benefit of the Holders in accordance with the Company’s Certificate of Incorporation in effect immediately prior to such transaction, whichever event occurs first.”

 

5.              Amendments to Voting Agreement.

 

(a)                                 Effective upon the Final Closing, clause (iv) of Section 2.3(e) of the Voting Agreement is hereby amended and restated as follows:

 

“(iv) the aggregate consideration receivable by all holders of the Preferred Stock and Common Stock shall be allocated among the holders of Preferred Stock and Common Stock on the basis of the relative liquidation preferences to which the holders of each respective series of Preferred Stock and the holders of Common Stock are entitled in a Deemed Liquidation Event (assuming for this purpose that the Proposed Sale is a Deemed Liquidation Event) in accordance with the Company’s Certificate of Incorporation in effect immediately prior to the Proposed Sale; and”

 

(b)                                 Effective upon the Final Closing, a new Section 2.3(g) is added to the Voting Agreement as follows (and the “; and” following Section 2.3(e) is moved to replace the period at the end of Section 2.3(f)):

 

6



 

“(g) no Investor shall be bound by any restrictive covenant in connection with a Sale of the Company that restricts its ability to conduct its business (such as a covenant not to compete) or places any similar business limitation on such Investor unless such Investor expressly agrees to such restrictive covenant in its discretion.”

 

(c)                                  Effective upon the Final Closing, new clauses (x), (xi) and (xii) are added to Section 5.8 of the Voting Agreement as follows (and the “; and” following clause (viii) as well as the “.” following clause (ix) of such Section 5.8 are replaced with “;”):

 

“(x)                           Section 2 of this Agreement shall not be amended or waived in a manner that is adverse to the holders of any series of the Preferred Stock but shall not similarly affect all of the holders of Preferred Stock without the written consent of the holders of a majority of the outstanding shares of such adversely affected series of Preferred Stock (voting or consenting exclusively, as a separate class), and this clause (x) shall not be amended or waived without the written consent of the holders of a majority of the outstanding shares of each series of the Preferred Stock (voting or consenting exclusively, as separate classes);

 

(xi)                              Section 2.3(g) of this Agreement and this clause (xi) shall not be amended or waived without the written consent of the holders of a majority of the outstanding shares of each series of the Preferred Stock (voting or consenting exclusively, as separate classes); and

 

(xii) Clause (iv) of Section 2.3(e) of this Agreement shall not be amended or waived if such amendment or waiver would result in or permit (at the time of such amendment or in the future) distribution of the aggregate consideration receivable by holders of a series of Preferred Stock other than in accordance with the liquidation preference to which the holders of such series of Preferred Stock would be entitled in a Deemed Liquidation Event (assuming for this purpose that the Proposed Sale is a Deemed Liquidation Event) in accordance with the Company’s Certificate of Incorporation in effect immediately prior to a Proposed Sale without the written consent of the holders of a majority of the outstanding shares of such series of Preferred Stock (voting or consenting exclusively, as separate classes) and this clause (xii) shall not be amended or waived without the written consent of the holders of a majority of the outstanding shares of each series of the Preferred Stock (each voting or consenting exclusively, as separate classes).”

 

6.                                      Amendment/Waiver.  Without limiting the specific amendments set forth herein, the terms and provisions of the Transaction Documents are hereby amended and/or waived to the extent necessary to provide for the transactions and arrangements contemplated hereby.

 

7.                                      Confirmation.  Each party hereto hereby confirms its consent and approval for all actions necessary or appropriate for the Company to provide for and implement the arrangements contemplated by this Amendment.

 

8.                                      Inconsistency.  To the extent that any provision of any of the Transaction Documents is inconsistent with any of the transactions and arrangements contemplated by this Amendment, each and every such inconsistency, and any and all related breaches or defaults, are hereby waived, and any and all claims as a result thereof are hereby released, by the Company, each of the undersigned stockholders of the Company and each of the Subsequent Purchasers.

 

7



 

9.                                      Full Force and Effect.  The Transaction Documents, as amended and/or waived hereby, remain in full force and effect.

 

10.                               Counterparts; Fax.  This Amendment may be (i) executed in multiple counterparts, each of which shall be deemed an original and together shall constitute one document, and (ii) executed and delivered by facsimile (and upon such delivery the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other parties).

 

[SIGNATURE PAGES FOLLOW]

 

8


 

IN WITNESS WHEREOF, the parties have executed this Omnibus Approval and Amendment as of the Effective Date.

 

COMPANY:

 

INVITAE CORPORATION

 

 

By:

/s/ Randal W. Scott

 

Name:

Randal W. Scott

 

Title:

Chief Executive Officer

 

 

 

Address:

 

458 Brannan Street

 

San Francisco, CA 94107

 

Facsimile: (415)520-9486

 

E-mail: randy.scott@invitae.com

 

 

9



EX-10.2 6 filename6.htm

Exhibit 10.2

 

AMENDMENT TO THE

INVITAE CORPORATION

2010 STOCK INCENTIVE PLAN

(f/k/a Locus Development, Inc. 2010 Stock Plan)

 

This amendment amends the 2010 Stock Incentive Plan (the “Plan”) of Invitae Corporation, a Delaware corporation (the “Company”), as previously amended. Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

WI T N E S S E T H:

 

WHEREAS, pursuant to action by unanimous written consent effective as of October 16, 2013, the Company’s Board of Directors (the “Board”) determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 3,000,000 Shares. (1)

 

NOW, THEREFORE, the Plan is hereby amended as follows:

 

1.             Shares Subject to Plan. Section 5.1 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to Sections 5.2 and 9, the aggregate number of Shares which may be issued under the Plan shall not exceed Thirteen Million Three Hundred Fifty-Four Thousand One Hundred Sixty-Seven (13,354,167) Shares.”

 

2.             Date of Amendment. To record the adoption of this amendment to the Plan by the Board as of October 16, 2013, and the approval by the stockholders of this amendment effective as of October 16, 2013, the Company has caused its authorized officer to execute the same.

 

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

 

 

/s/ Sean George

 

Sean George

 

President, Technology and Development

 


(1)           Note: prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 10,354,167 Shares.

 



 

AMENDMENT TO THE

INVITAE CORPORATION

2010 STOCK INCENTIVE PLAN

(f/k/a Locus Development, Inc. 2010 Stock Plan)

 

This amendment amends the 2010 Stock Incentive Plan (the “Plan”) of Invitae Corporation, a Delaware corporation (the “Company”), as previously amended. Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to action by unanimous written consent effective as of October 16, 2013, the Company’s Board of Directors (the “Board”) determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 3,000,000 Shares.(1)

 

NOW, THEREFORE, the Plan is hereby amended as follows:

 

1.                                      Shares Subject to Plan. Section 5.1 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to Sections 5.2 and 9, the aggregate number of Shares which may be issued under the Plan shall not exceed Thirteen Million Three Hundred Fifty-Four Thousand One Hundred Sixty-Seven (13,354,167) Shares.”

 

2.                                      Date of Amendment. To record the adoption of this amendment to the Plan by the Board as of October 16, 2013, and the approval by the stockholders of this amendment effective as of October 16, 2013, the Company has caused its authorized officer to execute the same.

 

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

 

 

/s/ Sean George

 

Sean George

 

President, Technology and Development

 


(1)                                 Note: prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 10,354,167 Shares.

 



 

AMENDMENT TO THE

INVITAE CORPORATION

2010 STOCK INCENTIVE PLAN

(f/k/a Locus Development, Inc. 2010 Stock Plan)

 

This amendment amends the 2010 Stock Incentive Plan (the “Plan”) of Invitae Corporation, a Delaware corporation (the “Company”), as previously amended. Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to action by unanimous written consent effective as of May 14, 2013, the Company’s Board of Directors (the “Board”) determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 354,167 Shares. (1)

 

NOW, THEREFORE, the Plan is hereby amended as follows:

 

l.                                          Shares Subject to Plan. Section 5.1 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to Sections 5.2 and 9, the aggregate number of Shares which may be issued under the Plan shall not exceed Ten Million Three Hundred Fifty-Four Thousand One Hundred Sixty-Seven (10,354,167) Shares.”

 

2.                                      Date of Amendment. To record the adoption of this amendment to the Plan by the Board as of May 14, 2013, and the approval by the stockholders of this amendment effective as of May 14, 2013, the Company has caused its authorized officer to execute the same.

 

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

 

 

/s/ Sean George

 

Sean George

 

President, Technology and Development

 


(1)                                 Note: prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 10,000,000 Shares.

 



 

AMENDMENT TO THE

LOCUS DEVELOPMENT, INC.

2010 INCENTIVE STOCK PLAN

 

This amendment amends the 2010 Stock Incentive Plan (the “Plan”) of Locus Development, Inc., a Delaware corporation (the “Company”). Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to action by unanimous written consent effective as of August 7, 2012, the Company’s Board of Directors (the “Board”) determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 7,236,364 Shares; provided, however, that 354,167 of such Shares shall be withheld until the Company consummates a pending right to repurchase an equal amount of Shares from Matthew Falkowski.(1)

 

NOW, THEREFORE, the Plan is hereby amended as follows:

 

1.                                      Shares Subject to Plan. Section 5.1 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to Sections 5.2 and 9, the aggregate number of Shares which may be issued under the Plan shall not exceed Ten Million (10,000,000) Shares; provided, however, that 354,167 of such Shares shall be withheld until the Company consummates a pending right to repurchase an equal amount of Shares from Matthew Falkowski.”

 

2.                                      Date of Amendment. To record the adoption of this amendment to the Plan by the Board as of August 7, 2012, and the approval by the stockholders of this amendment effective as of August 7, 2012, the Company has caused its authorized officer to execute the same.

 

 

 

LOCUS DEVELOPMENT, INC.,

 

a Delaware corporation

 

 

 

 

 

/s/ Sean George

 

Sean George, Chief Executive Officer

 


 

(1)                                 Note: prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 2,763,636 Shares.

 



 

 

INVITAE CORPORATION

 

(F/K/A LOCUS DEVELOPMENT, INC.)

 

2010 STOCK INCENTIVE PLAN

 

Adopted by the Board on September 17, 2010

 

Approved by the Stockholders on October 8, 2010

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

SECTION 1.

PURPOSE

1

 

 

 

SECTION 2.

DEFINITIONS

1

2.1

“Board”

1

2.2

“Change in Control”

1

2.3

“Code”

2

2.4

“Committee”

2

2.5

“Company”

2

2.6

“Consultant”

2

2.7

“Disability”

2

2.8

“Employee”

2

2.9

“Exchange Act”

2

2.10

“Exercise Price”

2

2.11

“Fair Market Value”

2

2.12

“ISO”

3

2.13

“NSO”

3

2.14

“Option”

3

2.15

“Optionee”

3

2.16

“Outside Director”

3

2.17

“Parent”

3

2.18

“Plan”

3

2.19

“Purchase Price”

3

2.20

“Purchaser”

3

2.21

“Restricted Share Agreement”

3

2.22

“Securities Act”

3

2.23

“Service”

3

2.24

“Share”

3

2.25

“Stock”

4

2.26

“Stock Option Agreement”

4

2.27

“Subsidiary”

4

2.28

“Ten-Percent Stockholder”

4

 

 

 

SECTION 3.

ADMINISTRATION

4

3.1

General Rule

4

3.2

Board Authority and Responsibility

4

 

 

 

SECTION 4.

ELIGIBILITY

4

4.1

General Rule

4

 

 

 

SECTION 5.

STOCK SUBJECT TO PLAN

4

5.1

Share Limit

4

5.2

Additional Shares

5

 

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SECTION 6.

RESTRICTED SHARES

5

6.1

Restricted Share Agreement

5

6.2

Duration of Offers and Nontransferability of Purchase Rights

5

6.3

Purchase Price

5

6.4

Repurchase Rights and Transfer Restrictions

5

 

 

 

SECTION 7.

STOCK OPTIONS

5

7.1

Stock Option Agreement

5

7.2

Number of Shares; Kind of Option

6

7.3

Exercise Price

6

7.4

Term

6

7.5

Exercisability

6

7.6

Repurchase Rights and Transfer Restrictions

6

7.7

Transferability of Options

7

7.8

Exercise of Options on Termination of Service

7

7.9

No Rights as a Stockholder

7

7.10

Modification, Extension and Renewal of Options

7

 

 

 

SECTION 8.

PAYMENT FOR SHARES

8

8.1

General

8

8.2

Surrender of Stock

8

8.3

Services Rendered

8

8.4

Promissory Notes

8

8.5

Exercise/Sale

8

8.6

Exercise/Pledge

8

8.7

Other Forms of Payment

8

 

 

 

SECTION 9.

ADJUSTMENT OF SHARES

9

9.1

General

9

9.2

Dissolution or Liquidation

9

9.3

Mergers and Consolidations

9

9.4

Reservation of Rights

9

 

 

 

SECTION 10.

REPURCHASE RIGHTS

9

10.1

Company’s Right To Repurchase Shares

9

 

 

 

SECTION 11.

WITHHOLDING AND OTHER TAXES

10

11.1

General

10

11.2

Share Withholding

10

11.3

Cashless Exercise/Pledge

10

11.4

Other Forms of Payment

10

11.5

Employer Fringe Benefit Taxes

10

 

 

 

SECTION 12.

SECURITIES LAW REQUIREMENTS

10

12.1

General

10

12.2

Dividend Rights

11

 

 

 

SECTION 13.

NO RETENTION RIGHTS

11

 

ii



 

SECTION 14.

DURATION AND AMENDMENTS

11

14.1

Term of the Plan

11

14.2

Right to Amend or Terminate the Plan

11

14.3

Effect of Amendment or Termination

11

 

 

 

SECTION 15.

EXECUTION

12

 

iii



 

INVITAE CORPORATION

 

2010 STOCK INCENTIVE PLAN

 

SECTION 1.                            PURPOSE.

 

The Plan was adopted by the Board of Directors effective September 17, 2010.  The purpose of the Plan is to offer selected service providers the opportunity to acquire equity in the Company through awards of Options (which may constitute incentive stock options or nonstatutory stock options) and the award or sale of Shares.

 

The award of Options and the award or sale of Shares under the Plan is intended to be exempt from the securities qualification requirements of the California Corporations Code by satisfying the exemption under section 25102(o) of the California Corporations Code.  However, awards of Options and the award or sale of Shares may be made in reliance upon other state securities law exemptions.  To the extent that such other exemptions are relied upon, the terms of this Plan which are included only to comply with section 25102(o) shall be disregarded to the extent provided in the Stock Option Agreement or Restricted Share Agreement.  In addition, to the extent that section 25102(o) or the regulations promulgated thereunder are amended to delete any requirements set forth in such law or regulations, the terms of this Plan which are included only to comply with section 25102(o) or the regulations promulgated thereunder as in effect prior to any such amendment shall be disregarded to the extent permitted by applicable law.

 

SECTION 2.                            DEFINITIONS.

 

2.1                               “Board” shall mean the Board of Directors of the Company, as constituted from time to time.

 

2.2                               “Change in Control” shall mean the occurrence of any of the following events:

 

(a)                                 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 fifty percent (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;

 

(b)                                 The consummation of the sale, transfer or other disposition of all or substantially all of the Company’s assets or the stockholders of the Company approve a plan of complete liquidation of the Company; or

 

(c)                                  Any “person” (as defined below) who, by the acquisition or aggregation of securities, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the

 

1



 

“Base Capital Stock”); except that any change in the relative beneficial ownership of the Company’s securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person’s beneficial ownership of any securities of the Company.

 

For purposes of Section 2.2(c), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (1) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or Subsidiary and (2) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Stock.

 

Notwithstanding the foregoing, the term “Change in Control” shall not include (a) a transaction the sole purpose of which is to change the state of the Company’s incorporation, (b) a transaction the sole purpose of which is to form a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction, (c) a transaction the sole purpose of which is to make an initial public offering of the Company’s Stock or (d) any change in the beneficial ownership of the securities of the Company as a result of a private financing of the Company that is approved by the Board.

 

2.3                               “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

2.4                               “Committee” shall mean the committee designated by the Board, which is authorized to administer the Plan, as described in Section 3 hereof.

 

2.5                               “Company” shall mean InVitae Corporation, a Delaware corporation.

 

2.6                               “Consultant” shall mean a consultant or advisor who is not an Employee or Outside Director and who performs bona fide services for the Company, a Parent or Subsidiary.

 

2.7                               “Disability” shall mean a condition that renders an individual unable to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment.

 

2.8                               “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary and who is an “employee” within the meaning of section 3401(c) of the Code and regulations issued thereunder.

 

2.9                               “Exchange Act” shall mean the U.S. Securities and Exchange Act of 1934, as amended.

 

2.10                        “Exercise Price” shall mean the amount for which one Share may be purchased upon the exercise of an Option, as specified in a Stock Option Agreement.

 

2.11                       “Fair Market Value” means, with respect to a Share, the market price of one Share of Stock, determined by the Board in good faith.  Such determination shall be conclusive and binding on all persons.

 

2



 

2.12                        “ISO” shall mean an incentive stock option described in section 422(b) of the Code.

 

2.13                        “NSO” shall mean a stock option that is not an ISO.

 

2.14                        “Option” shall mean an ISO or NSO granted under the Plan and entitling the holder to purchase Shares.

 

2.15                        “Optionee” shall mean a person that holds an Option.

 

2.16                        “Outside Director” shall mean a member of the Board of the Company, a Parent or a Subsidiary who is not an Employee.

 

2.17                        “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 fifty percent (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.

 

2.18                        “Plan” shall mean the InVitae Corporation 2010 Stock Incentive Plan.

 

2.19                        “Purchase Price” shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option).

 

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

 

2.21                        “Restricted Share 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.

 

2.22                        “Securities Act” shall mean the U.S. Securities Act of 1933, as amended.

 

2.23                        “Service” shall mean service as an Employee, a Consultant or an Outside Director, subject to such further limitations as may be set forth in the applicable Stock Option Agreement or Restricted Share Agreement.  Service shall be deemed to continue during a bona fide leave of absence approved by the Company in writing if and to the extent that continued crediting of Service for purposes of the Plan is expressly required by the terms of such leave or by applicable law, as determined by the Company.  However, for purposes of determining whether an Option is entitled to ISO status, and to the extent required under the Code, an Employee’s employment will be treated as terminating three (3) months after such Employee went on leave, unless such Employee’s right to return to active work is guaranteed by law or by a contract or such Employee immediately returns to active work.  The Company determines which leaves count toward Service, and when Service terminates for all purposes under the Plan.

 

2.24                        “Share” shall mean one share of Stock, as adjusted in accordance with Section 9 (if applicable).

 

3



 

2.25                        “Stock” shall mean the common stock of the Company.

 

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

 

2.27                        “Subsidiary” means 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 fifty percent (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.

 

2.28                        “Ten-Percent Stockholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries.  In determining stock ownership for purposes of this Section 2.28, the attribution rules of section 424(d) of the Code shall be applied.

 

SECTION 3.                            ADMINISTRATION.

 

3.1                               General Rule.  The Plan shall be administered by the Board.  However, the Board may delegate any or all administrative functions under the Plan otherwise exercisable by the Board to one or more Committees.  Each Committee shall consist of at least one member of the Board who has been appointed by the Board.   Each Committee shall have the authority and be responsible for such functions as the Board has assigned to it.  If a Committee has been appointed, any reference to the Board in the Plan shall be construed as a reference to the Committee to whom the Board has assigned a particular function.  To the extent permitted by applicable law, the Board may also authorize one or more officers of the Company to designate Employees, other than such authorized officer or officers, to receive awards and/or to determine the number of such awards to be received by such persons; provided, however, that the Board shall specify the total number of awards that such officer or officers may so award.

 

3.2                               Board Authority and Responsibility.  Subject to the provisions of the Plan, the Board 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 any other actions of the Board with respect to the Plan shall be final and binding on all persons deriving rights under the Plan.

 

SECTION 4.                            ELIGIBILITY.

 

4.1                               General Rule.  Only Employees shall be eligible for the grant of ISOs.  Only Employees, Consultants and Outside Directors shall be eligible for the grant of NSOs or the award or sale of Shares.

 

SECTION 5.                            STOCK SUBJECT TO PLAN.

 

5.1                              Share Limit.  Subject to Sections 5.2 and 9, the aggregate number of Shares which may be issued under the Plan shall not exceed Two Million Seven Hundred Sixty-Three

 

4



 

Thousand Six Hundred Thirty-Six (2,763,636) Shares.  The number of Shares which are subject to Options or other rights outstanding at any time shall not exceed the number of Shares which 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.

 

5.2                               Additional Shares.  In the event that any outstanding Option or other right expires or is canceled for any reason, the Shares allocable to the unexercised portion of such Option or other right shall remain available for issuance pursuant to the Plan.  If a Share previously issued under the Plan is reacquired by the Company pursuant to a forfeiture provision, right of repurchase or right of first refusal, then such Share shall revert to and again become available for issuance under the Plan (i.e., the original issuance of such Share shall not be deemed to have reduced the number of Shares which remain available for issuance under the Plan).

 

SECTION 6.                            RESTRICTED SHARES.

 

6.1                               Restricted Share Agreement.  Each award or sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Restricted Share 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 imposed by the Board, as set forth in the Restricted Share Agreement, that are not inconsistent with the Plan.  The provisions of the various Restricted Share Agreements entered into under the Plan need not be identical.

 

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

 

6.3                               Purchase Price.  To the extent an award consists of newly issued Shares, the award recipient shall furnish consideration having a value not less than the par value of such Shares as determined by the Board.  Subject to the foregoing in this Section 6.3, the Board shall determine the amount of the Purchase Price in its sole discretion.  The Purchase Price shall be payable in a form described in Section 8.

 

6.4                               Repurchase Rights and Transfer Restrictions.  Each award or sale of Shares shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board may determine, subject to the requirements of Section 10.  Such restrictions shall be set forth in the applicable Restricted Share Agreement and shall apply in addition to any restrictions otherwise applicable to holders of Shares generally.

 

SECTION 7.                            STOCK OPTIONS.

 

7.1                               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

 

5



 

subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions imposed by the Board, as set forth in the Stock Option Agreement, which are not inconsistent with the Plan.  The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.

 

7.2                               Number of Shares; Kind of Option.  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 9.  The Stock Option Agreement shall also specify whether the Option is intended to be an ISO or an NSO.

 

7.3                               Exercise Price.  Each Stock Option Agreement shall set forth the Exercise Price, which shall be payable in a form described in Section 8. Subject to the following requirements, the Exercise Price under any Option shall be determined by the Board in its sole discretion:

 

(a)                                 Minimum Exercise Price for ISOs.  The Exercise Price per Share of an ISO shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant; provided, however, that the Exercise Price per Share of an ISO granted to a Ten-Percent Stockholder shall not be less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date of grant.

 

(b)                                 Minimum Exercise Price for NSOs.  The Exercise Price per Share of an NSO shall not be less than one-hundred percent (100%) of the Fair Market Value of a Share on the date of grant.

 

7.4                               Term.  Each Stock Option Agreement shall specify the term of the Option.  The term of an Option shall in no event exceed ten (10) years from the date of grant.  The term of an ISO granted to a Ten-Percent Stockholder shall not exceed five (5) years from the date of grant.  Subject to the foregoing, the Board in its sole discretion shall determine when an Option shall expire.

 

7.5                               Exercisability.  Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable; provided, however, that no Option shall be exercisable unless the Optionee has delivered to the Company an executed copy of the Stock Option Agreement.  Subject to the following restrictions, the Board in its sole discretion shall determine when all or any installment of an Option is to become exercisable and may, in its discretion, provide for accelerated exercisability in the event of a Change in Control or other events:

 

(a)                                 Options Granted to Outside Directors.  The exercisability of an Option granted to an Optionee for service as an Outside Director shall be automatically accelerated in full in the event of a Change in Control.

 

(b)                                 Early Exercise.  A Stock Option Agreement may permit the Optionee to exercise the Option as to Shares that are subject to a right of repurchase by the Company in accordance with the requirements of Section 10.1.

 

7.6                              Repurchase Rights and Transfer Restrictions.  Shares purchased on exercise of Options shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal

 

6


 

and other transfer restrictions as the Board may determine, subject to the requirements of Section 10.  Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any restrictions otherwise applicable to holders of Shares generally.

 

7.7                               Transferability of Options.  During an Optionee’s lifetime, his or her Options shall be exercisable only by the Optionee or by the Optionee’s guardian or legal representatives, and shall not be transferable other than by beneficiary designation, will or the laws of descent and distribution.  Notwithstanding the foregoing, however, to the extent permitted by the Board in its sole discretion, an NSO may be transferred by the Optionee to a revocable trust or to one or more family members or a trust established for the benefit of the Optionee and/or one or more family members to the extent permitted by section 260.140.41(c) of Title 10 of the California Code of Regulations and Rule 701 of the Securities Act.

 

7.8                               Exercise of Options on Termination of Service.  Each Option shall set forth the extent to which the Optionee shall have the right to exercise the Option following termination of the Optionee’s Service.  Each Stock Option Agreement shall provide the Optionee with the right to exercise the Option following the Optionee’s termination of Service during the Option term, to the extent the Option was exercisable for vested Shares upon termination of Service, for at least thirty (30) days if termination of Service is due to any reason other than cause, death or Disability, and for at least six (6) months after termination of Service if due to death or Disability (but in no event later than the expiration of the Option term).  If the Optionee’s Service is terminated for cause, the Stock Option Agreement may provide that the Optionee’s right to exercise the Option terminates immediately on the effective date of the Optionee’s termination.  To the extent the Option was not exercisable for vested Shares upon termination of Service, the Option shall terminate when the Optionee’s Service terminates.  Subject to the foregoing, such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.

 

7.9                               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 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 the Option.  No adjustments shall be made, except as provided in Section 9.

 

7.10                        Modification, Extension and Renewal of Options.  Within the limitations of the Plan, the Board may modify, extend or renew outstanding Options or may accept the cancellation of outstanding Options (to the extent not previously exercised), whether or not granted hereunder, 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, materially impair his or her rights or increase the Optionee’s obligations under such Option.

 

7



 

SECTION 8.                            PAYMENT FOR SHARES.

 

8.1                               General.  The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash, cash equivalents or one of the other forms provided in this Section 8.

 

8.2                               Surrender of Stock.  To the extent permitted by the Board in its sole discretion, payment may be made in whole or in part by surrendering (in good form for transfer), or attesting to ownership of, Shares which have already been owned by the Optionee; provided, however, that payment may not be made in such form if such action would cause the Company to recognize any (or additional) compensation expense with respect to the Option for financial reporting purposes.  Such Shares shall be valued at their Fair Market Value on the date of Option exercise.

 

8.3                               Services Rendered.  As determined by the Board in its discretion, Shares may be awarded under the Plan in consideration of past or future services rendered to the Company, a Parent or Subsidiary.

 

8.4                               Promissory Notes.  To the extent permitted by the Board in its sole discretion, payment may be made in whole or in part with a full-recourse promissory note executed by the Optionee or Purchaser.  The interest rate payable under the promissory note shall not be less than the minimum rate required to avoid the imputation of income for U.S. federal income tax purposes.  Shares shall be pledged as security for payment of the principal amount of the promissory note, and interest thereon; provided that if the Optionee or Purchaser is a Consultant, such note must be collateralized with such additional security to the extent required by applicable laws.  In no event shall the stock certificate(s) representing such Shares be released to the Optionee or Purchaser until such note is paid in full.  Subject to the foregoing, the Board shall determine the term, interest rate and other provisions of the note.

 

8.5                               Exercise/Sale.  To the extent permitted by the Board in its sole discretion, and if a public market for the Shares exists, payment may be made in whole or in part by 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 sale proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.

 

8.6                               Exercise/Pledge.  To the extent permitted by the Board in its sole discretion, and if a public market for the Shares exists, payment may be made in whole or in part by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker or lender approved by the Company to pledge Shares, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.

 

8.7                               Other Forms of Payment. To the extent permitted by the Board in its sole discretion, payment may be made in any other form that is consistent with applicable laws, regulations and rules.

 

8



 

SECTION 9.                            ADJUSTMENT OF SHARES.

 

9.1                               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 shall make appropriate adjustments to the following:  (i) the number of Shares available for future awards under Section 5; (ii) the number of Shares covered by each outstanding Option; (iii) the Exercise Price under each outstanding Option; and (iv) the price of Shares subject to the Company’s right of repurchase.

 

9.2                               Dissolution or Liquidation.  To the extent not previously exercised or settled, Options shall terminate immediately prior to the dissolution or liquidation of the Company.

 

9.3                               Mergers and Consolidations.  In the event that the Company is a party to a merger or other consolidation, or in the event of a transaction providing for the sale of all or substantially all of the Company’s stock or assets, outstanding Options shall be subject to the agreement of merger, consolidation or sale.  Such agreement may provide for one or more of the following:  (i) the continuation of the outstanding Options by the Company, if the Company is a surviving corporation; (ii) the assumption of the Plan and 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) immediate exercisability of such outstanding Options followed by the cancellation of such Options; or (v) settlement of the intrinsic value of the outstanding Options (whether or not then exercisable) in cash or cash equivalents or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Options or the underlying Shares) followed by the cancellation of such Options; in each case without the Optionee’s consent.

 

9.4                               Reservation of Rights.  Except as provided in this Section 9, an Optionee or offeree shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or 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 10.                     REPURCHASE RIGHTS.

 

10.1                        Company’s Right To Repurchase Shares.  The Company shall have the right to repurchase Shares that have been acquired through an award or sale of Shares or exercise of an Option upon termination of the Purchaser’s or Optionee’s Service if provided in the applicable Restricted Share Agreement or Stock Option Agreement.  The Board in its

 

9



 

sole discretion shall determine when the right to repurchase shall lapse as to all or any portion of the Shares, and may, in its discretion, provide for accelerated vesting in the event of a Change in Control or other events; provided, however, that the right to repurchase shall lapse as to all of the Shares issued to an Outside Director for service as an Outside Director in the event of Change in Control.

 

SECTION 11.                     WITHHOLDING AND OTHER TAXES.

 

11.1                        General.  An Optionee or Purchaser or his or her successor shall pay, or make arrangements satisfactory to the Board for the satisfaction of, any federal, state, local or foreign withholding tax obligations that may arise in connection with the Plan.  The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.

 

11.2                        Share Withholding.  The Board may permit an Optionee or Purchaser to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that would otherwise be issued to him or her upon exercise of an Option, or by surrendering all or a portion of any Shares that he or she previously acquired; provided, however, that in no event may an Optionee or Purchaser surrender Shares in excess of the legally required withholding amount based on the minimum statutory withholding rates for federal and state tax purposes that apply to supplemental taxable income.  Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash.  Any payment of taxes by assigning Shares to the Company may be subject to restrictions, including any restrictions required by rules of any federal or state regulatory body or other authority.  All elections by Optionees or Purchasers to have Shares withheld for this purpose shall be made in such form and under such conditions as the Board may deem necessary or advisable.

 

11.3                        Cashless Exercise/Pledge.  The Board may provide that if Company Shares are publicly traded at the time of exercise, arrangements may be made to meet the Optionee’s or Purchaser’s withholding obligation by cashless exercise or pledge.

 

11.4                        Other Forms of Payment.  The Board may permit such other means of tax withholding as it deems appropriate.

 

11.5                        Employer Fringe Benefit Taxes.  To the extent permitted by applicable federal, state, local and foreign law, an Optionee or Purchaser shall be liable for any fringe benefit tax that may be payable by the Company and/or the Optionee’s or Purchaser’s employer in connection with any award granted to the Optionee or Purchaser under the Plan, which the Company and/or employer may collect by any reasonable method established by the Company and/or employer.

 

SECTION 12.                     SECURITIES LAW REQUIREMENTS.

 

12.1                        General. Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock

 

10



 

exchange or other securities market on which the Company’s securities may then be listed.

 

12.2                        Dividend Rights.  A Restricted Share Agreement may require that the holders of Shares invest any cash dividends received in additional Shares.  Such additional Shares shall be subject to the same conditions and restrictions as the award with respect to which the dividends were paid.

 

SECTION 13.                     NO RETENTION RIGHTS.

 

No provision of the Plan, or any right or Option granted under the Plan, shall be construed to give any Optionee or Purchaser any right to become an Employee, to be treated as an Employee, or to continue in Service for any period of time, or restrict in any way the rights of the Company (or Parent or subsidiary to whom the Optionee or Purchaser provides Service), which rights are expressly reserved, to terminate the Service of such person at any time and for any reason, with or without cause, without thereby incurring any liability to him or her.

 

SECTION 14.                     DURATION AND AMENDMENTS.

 

14.1                        Term of the Plan.  The Plan, as set forth herein, shall become effective on the date of its adoption by the Board, subject to the approval of the Company’s stockholders.  In the event that the stockholders fail to approve the Plan within twelve (12) months after its adoption by the Board, any grants, exercises or sales that have already occurred under the Plan shall be rescinded, and no additional grants, exercises or sales shall be made under the Plan after such date.  The Plan shall terminate automatically ten (10) years after its adoption by the Board.  The Plan may be terminated on any earlier date pursuant to Section 14.2 below.

 

14.2                        Right to Amend or Terminate the Plan.  The Board may amend, suspend, or terminate the Plan at any time and for any reason.  An amendment of the Plan shall not be subject to the approval of the Company’s stockholders unless it (i) increases the number of Shares available for issuance under the Plan (except as provided in Section 9) or (ii) materially changes the class of persons who are eligible for the grant of Options or the award or sale of Shares.

 

14.3                        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 adversely affect any Shares previously issued or any Option previously granted under the Plan without the holder’s consent.

 

11



 

SECTION 15.                     EXECUTION.

 

To record the adoption of the Plan by the Board on September 17, 2010, effective on such date, the Company has caused its authorized officer to execute the same.

 

 

INVITAE CORPORATION

 

 

 

 

 

 

By

/s/ Sean E. George

 

 

Sean E. George

 

 

Chief Executive Officer

 

12


 

AMENDMENT TO THE

INVITAE CORPORATION

2010 STOCK INCENTIVE PLAN

(f/k/a Locus Development, Inc. 2010 Stock Plan)

 

This amendment amends the 2010 Stock Incentive Plan (the “Plan”) of Invitae Corporation, a Delaware corporation (the “Company”), as previously amended. Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

WITNESSETH:

 

WHEREAS, pursuant to action by unanimous written consent effective as of August 26, 2014, the Company’s Board of Directors (the “Board”) determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 2,000,000 Shares.(1)

 

NOW, THEREFORE, the Plan is hereby amended as follows:

 

1.                                      Shares Subject to Plan. Section 5.1 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to Sections 5.2 and 9, the aggregate number of Shares which may be issued under the Plan shall not exceed Fifteen Million Three Hundred Fifty-Four Thousand One Hundred Sixty-Seven (15,354,167) Shares.”

 

2.                                      Date of Amendment. To record the adoption of this amendment to the Plan by the Board as of August 26, 2014, and the approval by the stockholders of this amendment effective as of August 26, 2014, the Company has caused its authorized officer to execute the same.

 

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

 

 

/s/ Lee Bendekgey

 

Lee Bendekgey

 

Chief Financial Officer

 


(1)                                 Note: prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 13,354,167 Shares.

 



EX-10.3 7 filename7.htm

Exhibit 10.3

 

Standard Exercise

 

Legend for Merging:

 

[AAAA] = Date of Grant

[BBBB] = Name of Optionee

[CCCC] = Number of Shares

[DDDD] = Exercise Price

[EEEE] = Vesting Start Date

[FFFF] = Type of Option (i.e., ISO or NSO)

 

Other Actions:

 

·                  Confirm use of this form is for an option grant without early exercise features

·                  Confirm or modify Vesting Schedule below (in this Notice of Stock Option Grant), including any acceleration features if applicable

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS IS NOT REQUIRED.

 

INVITAE CORPORATION
2010 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

 

InVitae Corporation (f/k/a Locus Development, Inc.) (the “Company”) hereby grants you the following Option to purchase shares of its common stock (“Shares”).  The terms and conditions of this Option are set forth in the Stock Option Agreement and the InVitae Corporation 2010 Stock Incentive Plan (the “Plan”), both of which are attached to and made a part of this document.

 

Date of Grant:

 

[AAAA]

 

 

 

Name of Optionee:

 

[BBBB]

 

 

 

Number of Option Shares:

 

[CCCC]

 

 

 

Exercise Price per Share:

 

$[DDDD] (The Exercise Price per Share of an Option shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. If Optionee is a Ten-Percent Stockholder, the Exercise Price per Share of an ISO must be at least one hundred ten percent (110%) of Fair Market Value.)

 



 

Vesting Start Date:

 

[EEEE]

 

 

 

Type of Option:

 

[FFFF]

 

 

 

Vesting Schedule:

 

Subject to the terms and conditions set forth in Section 2 of the Stock Option Agreement, the Option vests with respect to the first 25% of the Shares when the Optionee completes 12 months of continuous Service after the Vesting Start Date, and with respect to an additional 1/48th of the Shares when the Optionee completes each full month of continuous Service thereafter.

 

By signing this document, you acknowledge receipt of a copy of the Plan, and agree that: (a) you have carefully read, fully understand and agree to all of the terms and conditions described in the attached Stock Option Agreement, the Plan document and “Notice of Exercise and Common Stock Purchase Agreement” (the “Exercise Notice”); (b) you hereby make the purchaser’s investment representations contained in the Exercise Notice with respect to the grant of this Option; (c) you understand and agree that the Stock Option Agreement, including its cover sheet and attachments, constitutes the entire understanding between you and the Company regarding this Option, and that any prior agreements, commitments or negotiations concerning this Option are replaced and superseded; and (d) you have been given an opportunity to consult your own legal and tax counsel with respect to all matters relating to this Option prior to signing this cover sheet and that you have either consulted such counsel or voluntarily declined to consult such counsel.

 

[BBBB]

 

INVITAE CORPORATION

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

Its:

 

 

INVITAE CORPORATION
NOTICE OF STOCK OPTION GRANT

 

2



 

INVITAE CORPORATION

 

2010 STOCK INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

SECTION 1.                                     KIND OF OPTION.

 

This Option is intended to be either an incentive stock option intended to meet the requirements of Section 422 of the Internal Revenue Code (an “ISO”) or a non-statutory option (an “NSO”), which is not intended to meet the requirements of an ISO, as indicated in the Notice of Stock Option Grant.  Even if this Option is designated as an ISO, it shall be deemed to be an NSO to the extent required by the $100,000 annual limitation under Section 422(d) of the Code.

 

SECTION 2.                                     VESTING.

 

Subject to the terms and conditions of the Plan and this Stock Option Agreement (the “Agreement”), your Option will be exercisable with respect to the Shares that have become vested in accordance with the schedule set forth in the Notice of Stock Option Grant.  If your Option is granted in consideration of your Service as an Employee or a Consultant, after your Service as an Employee or a Consultant terminates for any reason, vesting of your Shares subject to such Option immediately stops and such Option expires immediately as to the number of Shares that are not vested as of the date your Service as an Employee or a Consultant terminates.  If your Option is granted in consideration of your Service as an Outside Director, after your Service as an Outside Director terminates for any reason, vesting of your Shares subject to such Option immediately stops and such Option expires immediately as to the number of Shares that are not vested as of the date your Service as an Outside Director terminates.

 

SECTION 3.                                     TERM.

 

Your Option will expire in any event at the close of business at Company headquarters on ten (10) years after the Date of Grant; provided, however, that if your Option is an ISO it will expire five (5) years after the Date of Grant if you are a Ten-Percent Stockholder of the Company (the “Expiration Date”).  Also, your Option will expire earlier if your Service terminates, as described below.

 

SECTION 4.                                     REGULAR TERMINATION.

 

(a)                                 If your Service terminates for any reason except death or Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date three (3) months after your termination of Service.  During that three (3) month period, you may exercise the portion of your Option that was vested on your termination date.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

1



 

(b)                                 If your Option is an ISO and you exercise it more than three months after termination of your Service as an Employee for any reason other than death or Disability expected to result in death or to last for a continuous period of at least twelve (12) months, your Option will cease to be eligible for ISO tax treatment.

 

(c)                                  Your Option will cease to be eligible for ISO tax treatment if you exercise it more than three (3) months after the ninetieth (90th) day of a bona fide leave of absence approved by the Company, unless you return to employment immediately upon termination of such leave or your right to reemployment after your leave was guaranteed by statute or contract.

 

SECTION 5.                                     DEATH.

 

If you die while in Service with the Company, the vested portion of your Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of your death.  During that twelve (12) month period, your estate, legatees or heirs may exercise that portion of your Option that was vested on the date of your death.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

 

SECTION 6.                                     DISABILITY.

 

(a)                                 If your Service terminates because of a Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date twelve (12) months after your termination date.  During that twelve (12) month period, you may exercise that portion of your Option that was vested on the date of your Disability.  “Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

 

(b)                                 If your Option is an ISO and your Disability is not expected to result in death or to last for a continuous period of at least twelve (12) months, your Option will be eligible for ISO tax treatment only if it is exercised within three (3) months following the termination of your Service as an Employee.

 

SECTION 7.                                     EXERCISING YOUR OPTION.

 

To exercise your Option, you must execute the Notice of Exercise and Common Stock Purchase Agreement (the “Exercise Notice”), attached as Exhibit A.  You must submit this form, together with full payment, to the Company.  Your exercise will be effective when it is received by the Company.  If someone else wants to exercise your Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

 

2



 

SECTION 8.                                     PAYMENT FORMS.

 

When you exercise your Option, you must include payment of the Exercise Price for the Shares you are purchasing in cash or cash equivalents.  Alternatively, you may pay all or part of the Exercise Price by surrendering, or attesting to ownership of, Shares already owned by you, unless such action would cause the Company to recognize any (or additional) compensation expense with respect to the Option for financial reporting purposes.  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 of Option exercise.  To the extent that a public market for the Shares exists and to the extent permitted by applicable law, in each case as determined by the Company, you also may exercise your Option by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price and, if requested, applicable withholding taxes.  The Company will provide the forms necessary to make such a cashless exercise.  The Board may permit such other payment forms as it deems appropriate, subject to applicable laws, regulations and rules.

 

SECTION 9.                                     TAX WITHHOLDING AND REPORTING.

 

(a)                                 You will not be allowed to exercise this Option unless you pay, or make acceptable arrangements to pay, any taxes required to be withheld as a result of the Option exercise or the sale of Shares acquired upon exercise of this Option.  You hereby authorize withholding from payroll or any other payment due you from the Company or your employer to satisfy any such withholding tax obligation.

 

(b)                                 If you sell or otherwise dispose of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, you shall immediately notify the Company in writing of such disposition.

 

(c)                                  By signing this Agreement, you explicitly and unambiguously consent and agree to assume any liability for fringe benefit tax that may be payable by the Company and/or your employer in connection with this Option to the extent permitted under applicable law.  Further, by signing this Agreement, you agree that the Company and/or your employer may collect the fringe benefit tax from you by any reasonable method established by the Company and/or your employer.  You further agree to execute any other consents or elections required to accomplish the above, promptly upon request of the Company and/or your employer.

 

SECTION 10.                              RIGHT OF FIRST REFUSAL.

 

In the event that you propose 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 a “Right of First Refusal” with respect to such Shares in accordance with the provisions of the Exercise Notice.

 

3



 

SECTION 11.                              RESALE RESTRICTIONS/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 U.S. Securities Act of 1933, as amended, including the Company’s initial public offering, you may be prohibited from engaging in any transaction with respect to any of the Company’s common stock without the prior written consent of the Company or its underwriters in accordance with the provisions of the Exercise Notice.

 

SECTION 12.                              TRANSFER OF OPTION.

 

Prior to your death, only you may exercise this Option.  This Option and the rights and privileges conferred hereby cannot 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.  For instance, you may not sell this Option or use it as security for a loan.  If you attempt to do any of these things, this Option will immediately become invalid.  You may, however, dispose of this Option in your will.  Regardless of any marital property settlement agreement, the Company is not obligated to honor an Exercise Notice from your spouse or former spouse, nor is the Company obligated to recognize such individual’s interest in your Option in any other way. Notwithstanding the foregoing, however, to the extent permitted by the Board in its sole discretion, an NSO may be transferred by you to a revocable trust or to one or more family members or to a trust established for your benefit and/or one or more of your family members to the extent permitted by the Plan.

 

SECTION 13.                              RETENTION RIGHTS.

 

This Agreement does not give you the right to be retained by the Company in any capacity.  The Company reserves the right to terminate your Service at any time and for any reason without thereby incurring any liability to you.

 

SECTION 14.                              STOCKHOLDER RIGHTS.

 

Neither you nor your estate or heirs have any rights as a stockholder of the Company until a certificate for the Shares acquired upon exercise of this Option has been issued.  No adjustments are made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.

 

SECTION 15.                              ADJUSTMENTS.

 

In the event of a stock split, a stock dividend or a similar change in the Company’s Stock, the number of Shares covered by this Option and the Exercise Price per share may be adjusted pursuant to the Plan.  Your Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity as set forth in the Plan.

 

4



 

SECTION 16.                              LEGENDS.

 

All certificates representing the Shares issued upon exercise of this Option shall, where applicable, have endorsed thereon the following legends:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS IS NOT REQUIRED.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF.  SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES.  THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.

 

If the Option is an ISO, then the following legend should be included:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY OF THE DATE ON WHICH THE OPTION WAS EXERCISED.  THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF THE SHARES ARE TRANSFERRED BEFORE SUCH DATE.

 

SECTION 17.                              TAX DISCLAIMER.

 

You agree that you are responsible for consulting your own tax advisor as to the tax consequences associated with your Option.  The tax rules governing options are complex, change frequently and depend on the individual taxpayer’s situation.  For your information, a memorandum that briefly summarizes current U.S. federal income tax law relating to certain aspects of stock options is attached hereto as Exhibit B.  Please note that this memorandum does not purport to be complete.  Although the Company will make available to you general tax

 

5


 

information about stock options, you agree that the Company shall not be held liable or responsible for making such information available to you and any tax or financial consequences that you may incur in connection with your Option.

 

In addition, as noted in Exhibit B, options granted at a discount from fair market value may be considered “deferred compensation” subject to adverse tax consequences under new Section 409A of the Internal Revenue Code, which is generally effective January 1, 2005.  The Board has made a good faith determination that the exercise price per share of the Option is not less than the fair market value of the Shares underlying your Option on the Date of Grant.  It is possible, however, that the Internal Revenue Service could later challenge that determination and assert that the fair market value of the Shares underlying your Option was greater on the Date of Grant than the exercise price determined by the Board, which could result in immediate income tax upon the vesting of your Option (whether or not exercised) and a 20% tax penalty (plus applicable state penalties), as well as the loss of incentive stock option status (if applicable).  The Company gives no assurance that such adverse tax consequences will not occur and specifically assumes no responsibility therefor.  By accepting this Option, you acknowledge that any tax liability or other adverse tax consequences to you resulting from the grant of the Option will be the responsibility of, and will be borne entirely by, you.  YOU ARE THEREFORE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR BEFORE ACCEPTING THE GRANT OF THIS OPTION.

 

SECTION 18.                              THE PLAN AND OTHER AGREEMENTS.

 

The text of the Plan is incorporated in this Agreement by reference.  Certain capitalized terms used in this Agreement are defined in the Plan.  The Notice of Stock Option Grant, this Agreement, including its attachments, and the Plan constitute the entire understanding between you and the Company regarding this Option.  Any prior agreements, commitments or negotiations concerning this Option are superseded.

 

SECTION 19.                              MISCELLANEOUS PROVISIONS

 

(a)                                 You understand and acknowledge that:  (i) the Plan is entirely discretionary; (ii) the Company and your employer have reserved the right to amend, suspend or terminate the Plan at any time; (iii) the grant of an option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount; and (iv) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares offered, the Exercise Price and the vesting schedule, will be at the sole discretion of the Company.

 

(b)                                 The value of this Option shall be an extraordinary item of compensation outside the scope of your employment contract, if any, and shall not be considered a part of your normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

6



 

(c)                                  You understand and acknowledge that participation in the Plan ceases upon termination of your Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

 

(d)                                 You hereby authorize and direct your employer to disclose to the Company or any Subsidiary any information regarding your employment, the nature and amount of your compensation and the fact and conditions of your participation in the Plan, as your employer deems necessary or appropriate to facilitate the administration of the Plan.

 

(e)                                  You consent to the collection, use and transfer of personal data as described in this Subsection.  You understand and acknowledge that the Company, your employer and the Company’s other Subsidiaries hold certain personal information regarding you for the purpose of managing and administering the Plan, including (without limitation) your name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (the “Data”).  You further understand and acknowledge that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan.  You understand and acknowledge that the recipients of Data may be located in the United States or elsewhere.  You authorize such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering your participation in the Plan, including a transfer to any broker or other third party with whom you elect to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf.  You may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection by contacting the Human Resources Department of the Company in writing.

 

SECTION 20.                              APPLICABLE LAW.

 

This Agreement will be interpreted and enforced under the laws of the State of California (without regard to their choice of law provisions).

 

7



 

EXHIBIT A

 

INVITAE CORPORATION 2010 STOCK INCENTIVE PLAN
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

 

THIS AGREEMENT is dated as of                       ,         , between InVitae Corporation (the “Company”), and [BBBB] (“Purchaser”).

 

W I T N E S S E T H:

 

WHEREAS, the Company granted Purchaser a stock option on [AAAA] (the “Date of Grant”) pursuant to a stock option agreement (the “Option Agreement”) under which Purchaser has the right to purchase up to [CCCC] shares of the Company’s common stock (the “Option Shares”); and

 

WHEREAS, the Option is exercisable with respect to certain of the Option Shares as of the date hereof; and

 

WHEREAS, pursuant to the Option Agreement, Purchaser desires to purchase shares of the Company as herein described, on the terms and conditions set forth in this Agreement, the Option Agreement and the InVitae Corporation 2010 Stock Incentive Plan (the “Plan”).  Certain capitalized terms used in this Agreement are defined in the Plan.

 

NOW, THEREFORE, it is agreed between the parties as follows:

 

SECTION 1.                                     PURCHASE OF SHARES.

 

(a)                                 Pursuant to the terms of the Option Agreement, Purchaser hereby agrees to purchase from the Company and the Company agrees to sell and issue to Purchaser                    shares of the Company’s common stock (the “Common Stock”) for the Exercise Price per share specified in the Notice of Stock Option Grant payable by personal check, cashier’s check, money order or otherwise as permitted by the Option Agreement.  Payment shall be delivered at the Closing, as such term is defined below.

 

(b)                                 The closing (the “Closing”) under this Agreement shall occur at the offices of the Company as of the date hereof, or such other time and place as may be designated by the Company (the “Closing Date”).

 

SECTION 2.                                     ADJUSTMENT OF SHARES.

 

Subject to the provisions of the Certificate of Incorporation of the Company, if (a) there is any stock dividend or liquidating dividend of cash and/or property, stock split or other change

 

InVitae Corporation

EXHIBIT A TO STOCK OPTION AGREEMENT

NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

 

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in the character or amount of any of the outstanding securities of the Company, or (b) there is any consolidation, merger or sale of all or substantially all of the assets of the Company, then, in such event, any and all new, substituted or additional securities or other cash or property to which Purchaser is entitled by reason of Purchaser’s ownership of the shares shall be immediately subject to the Right of First Refusal, as defined below, with the same force and effect as the shares subject to the Right of First Refusal.  Appropriate adjustments shall be made to the number and/or class of shares subject to the Right of First Refusal to reflect the exchange or distribution of such securities.  In the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Right of First Refusal may be exercised by the Company’s successor.

 

SECTION 3.                                     THE COMPANY’S RIGHT OF FIRST REFUSAL.

 

Before any shares of Common Stock registered in the name of Purchaser may be sold or transferred, such shares shall first be offered to the Company as follows (the “Right of First Refusal”):

 

(a)                                 Purchaser shall promptly deliver a notice (“Notice”) to the Company stating:  (i) Purchaser’s bona fide intention to sell or transfer such shares; (ii) the number of such shares to be sold or transferred, and the basic terms and conditions of such sale or transfer; (iii) the price for which Purchaser proposes to sell or transfer such shares; (iv) the name of the proposed purchaser or transferee; and (v) proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable U.S. federal, state or foreign securities laws.  The Notice shall be signed by both Purchaser and the proposed purchaser or transferee and must constitute a binding commitment subject to the Company’s Right of First Refusal as set forth herein.

 

(b)                                 Within thirty (30) days after receipt of the Notice, the Company may elect to purchase all or any portion of the shares to which the Notice refers, at the price per share specified in the Notice.  If the Company elects not to purchase all or any portion of the shares, the Company may assign its right to purchase all or any portion of the shares.  The assignees may elect within thirty (30) days after receipt by the Company of the Notice to purchase all or any portion of the shares to which the Notice refers, at the price per share specified in the Notice.  An election to purchase shall be made by written notice to Purchaser.  Payment for shares purchased pursuant to this Section 3 shall be made within thirty (30) days after receipt of the Notice by the Company and, at the option of the Company, may be made by cancellation of all or a portion of outstanding indebtedness, if any, or in cash or both.

 

(c)                                  If all or any portion of the shares to which the Notice refers are not elected to be purchased, as provided in Section 3(b), Purchaser may sell those shares to any person named in the Notice at the price specified in the Notice, provided that such sale or transfer is consummated within sixty (60) days of the date of said Notice to the Company, and provided, further, that any such sale is made in compliance

 

A-2



 

with applicable U.S. federal, state and foreign securities laws and not in violation of any other contractual restrictions to which Purchaser is bound.  The third-party purchaser shall be bound by, and shall acquire the shares of stock subject to, the provisions of this Agreement, including the Company’s Right of First Refusal.

 

(d)                                 Any proposed transfer on terms and conditions different from those set forth in the Notice, as well as any subsequent proposed transfer shall again be subject to the Company’s Right of First Refusal and shall require compliance with the procedures described in this Section 3.

 

(e)                                  Purchaser agrees to cooperate affirmatively with the Company, to the extent reasonably requested by the Company, to enforce rights and obligations pursuant to this Agreement.

 

(f)                                   Notwithstanding the above, neither the Company nor any assignee of the Company under this Section 3 shall have any right under this Section 3 at any time subsequent to the closing of a public offering of the common stock of the Company pursuant to a registration statement declared effective under the U.S. Securities Act of 1933, as amended (the “Securities Act”).

 

(g)                                  This Section 3 shall not apply to (i) a transfer by will or intestate succession, or (ii) a transfer to one or more members of Purchaser’s Immediate Family (defined below) or to a trust established by Purchaser for the benefit of Purchaser and/or one or more members of Purchaser’s Immediate Family, provided that the transferee agrees in writing on a form prescribed by the Company to be bound by all of the provisions of this Agreement to the same extent as they apply to Purchaser.  The transferee shall execute a copy of the attached Annex I and file the same with the Secretary of the Company.  For purposes of this Agreement, Immediate Family means 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.

 

SECTION 4.                                     PURCHASER’S RIGHTS AFTER EXERCISE OF RIGHT OF FIRST REFUSAL.

 

If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Common Stock to be repurchased in accordance with the provisions of Section 3 of this Agreement, then from and after such time the person from whom such shares are to be repurchased 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 repurchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.

 

A-3



 

SECTION 5.                                     LEGEND OF SHARES.

 

All certificates representing the Common Stock purchased under this Agreement shall, where applicable, have endorsed thereon the following legends and any other legends required by applicable securities laws:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS IS NOT REQUIRED.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF.  SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES.  THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.

 

If the Option is an ISO, then the following legend should be included:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY OF THE DATE ON WHICH THE OPTION WAS EXERCISED.  THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF THE SHARES ARE TRANSFERRED BEFORE SUCH DATE.

 

SECTION 6.                                     PURCHASER’S INVESTMENT REPRESENTATIONS.

 

(a)                                 This Agreement is made with Purchaser in reliance upon Purchaser’s representation to the Company, which by Purchaser’s acceptance hereof Purchaser confirms, that the Common Stock which Purchaser will receive will be acquired with Purchaser’s own funds for investment for an indefinite period for Purchaser’s own account, not as a nominee or agent, and not with a view to the

 

A-4



 

sale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting participation in, or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of Purchaser’s property shall at all times be within Purchaser’s control.  By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, understanding or agreement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any of the Common Stock.

 

(b)                                 Purchaser understands that the Common Stock will not be registered or qualified under applicable U.S. federal, state or foreign securities laws on the ground that the sale provided for in this Agreement is exempt from registration or qualification under applicable U.S. federal, state or foreign securities laws and that the Company’s reliance on such exemption is predicated on Purchaser’s representations set forth herein.

 

(c)                                  Purchaser agrees that in no event shall Purchaser make a disposition of any of the Common Stock (including a disposition under Section 3 of this Agreement), unless and until:  (i) Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition; and (ii) Purchaser shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (A) such disposition will not require registration or qualification of such Common Stock under applicable U.S. federal, state or foreign securities laws or (B) appropriate action necessary for compliance with the applicable U.S. federal, state or foreign securities laws has been taken; or (iii) the Company shall have waived, expressly and in writing, its rights under clauses (i) and (ii) of this Subsection.

 

(d)                                 With respect to a transaction occurring prior to such date as the Plan and Common Stock thereunder are covered by a valid Form S-8 or similar U.S. federal registration statement, this Subsection shall apply unless the transaction is covered by the exemption in California Corporations Code Section 25102(o) or a similar broad-based exemption.  In connection with the investment representations made herein, Purchaser represents that Purchaser is able to fend for himself or herself in the transactions contemplated by this Agreement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Purchaser’s investment, has the ability to bear the economic risks of Purchaser’s investment and has been furnished with and has had access to such information as would be made available in the form of a registration statement together with such additional information as is necessary to verify the accuracy of the information supplied and to have all questions answered by the Company.

 

(e)                                  Purchaser understands that if the Company does not register with the U.S. Securities and Exchange Commission pursuant to Section 12 of the U.S.

 

A-5


 

Securities Exchange Act of 1934, as amended, or if a registration statement covering the Common Stock (or a filing pursuant to the exemption from registration under Regulation A of the Securities Act) under the Securities Act is not in effect when Purchaser desires to sell the Common Stock, Purchaser may be required to hold the Common Stock for an indeterminate period.  Purchaser also acknowledges that Purchaser understands that any sale of the Common Stock which might be made by Purchaser in reliance upon Rule 144 under the Securities Act may be made only in limited amounts in accordance with the terms and conditions of that Rule.

 

SECTION 7.                                     NO DUTY TO TRANSFER IN VIOLATION OF THIS AGREEMENT.

 

The Company shall not be required (a) to transfer on its books any shares of Common Stock of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

 

SECTION 8.                                     RIGHTS OF PURCHASER.

 

(a)                                 Except as otherwise provided herein, Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Common Stock.

 

(b)                                 Nothing in this Agreement shall be construed as a right by Purchaser to be retained by the Company, or a parent or subsidiary of the Company in any capacity.  The Company reserves the right to terminate Purchaser’s Service at any time and for any reason without thereby incurring any liability to Purchaser.

 

SECTION 9.                                     RESALE RESTRICTIONS/MARKET STAND-OFF.

 

Purchaser hereby agrees that 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, Purchaser shall not, directly or indirectly, engage in any transaction prohibited by the underwriter, or sell, make any short sale of, contract to sell, transfer the economic risk of ownership in, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any Common Stock without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or such underwriters.  Such period of time shall not exceed one hundred eighty (180) days and may be required by the underwriter as a market condition of the offering; provided, however, that if either (a) during the last seventeen (17) days of such one hundred eighty (180) day period, the Company issues an earnings release or material news or a material event relating to the Company occurs or (b) prior to the expiration of such one hundred eighty (180) day period, the Company announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the

 

A-6



 

one hundred eighty (180) day period, then the restrictions imposed during such one hundred eighty (180) day period shall continue to apply until the expiration of the eighteen (18) day period beginning on the issuance of the earnings release or the occurrence of the material news or material event; provided, further, that in the event the Company or the underwriter requests that the one hundred eighty (180) day period be extended or modified pursuant to then-applicable law, rules, regulations or trading policies, the restrictions imposed during the one hundred eighty (180) day period shall continue to apply to the extent requested by the Company or the underwriter to comply with such law, rules, regulations or trading policies.  Purchaser hereby agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto.  To enforce the provisions of this Section, the Company may impose stop-transfer instructions with respect to the Common Stock until the end of the applicable stand-off period.

 

SECTION 10.                              OTHER NECESSARY ACTIONS.

 

The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

 

SECTION 11.                              NOTICE.

 

Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon the earliest of personal delivery, receipt or the third full day following deposit in the United States Post Office with postage and fees prepaid, addressed to the other party hereto at the address last known or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto.

 

SECTION 12.                              SUCCESSORS AND ASSIGNS.

 

This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser and Purchaser’s heirs, executors, administrators, successors and assigns.  The failure of the Company in any instance to exercise the Right of First Refusal described herein shall not constitute a waiver of any other Right of First Refusal that may subsequently arise under the provisions of this Agreement.  No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of a like or different nature.

 

SECTION 13.                              APPLICABLE LAW.

 

This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such state.

 

SECTION 14.                              NO STATE QUALIFICATION.

 

THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF

 

A-7



 

CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE.  THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

 

SECTION 15.                              NO ORAL MODIFICATION.

 

No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto.

 

SECTION 16.                              ENTIRE AGREEMENT.

 

This Agreement, the Option Agreement and the Plan constitute the entire complete and final agreement between the parties hereto with regard to the subject matter hereof.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

 

INVITAE CORPORATION

[BBBB] (PURCHASER)

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

Signature

Its

 

 

 

 

A-8



 

ANNEX I

 

ACKNOWLEDGMENT OF AND AGREEMENT TO BE BOUND
BY THE NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT OF
INVITAE CORPORATION

 

The undersigned, as transferee of shares of InVitae Corporation hereby acknowledges that he or she has read and reviewed the terms of the Notice of Exercise and Common Stock Purchase Agreement of InVitae Corporation and hereby agrees to be bound by the terms and conditions thereof, as if the undersigned had executed said Agreement as an original party thereto.

 

Dated:                                         ,         .

 

 

 

 

 

 

 

 

(Signature of Transferee)

 

 

 

 

 

 

 

(Printed Name of Transferee)

 

INVITAE CORPORATION

ANNEX I

TO NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

 



 

EXHIBIT B

 

U.S. FEDERAL TAX INFORMATION

 

(Current as of August 2010)

 

The following memorandum briefly summarizes current U.S. federal income tax law.  The discussion is intended to be used solely for general information purposes and does not make specific representations to any participant.  A taxpayer’s particular situation may be such that some variation of the basic rules is applicable to him or her.  In addition, the U.S. federal income tax laws and regulations are revised frequently and may change again in the future.  Each participant is urged to consult a tax advisor, both with respect to U.S. federal income tax consequences as well as any foreign, state or local tax consequences, before exercising any option or before disposing of any shares of stock acquired under the Plan.

 

Initial Grant of Options

 

The grant of an option, whether a nonqualified or nonstatutory stock option (“NSO”) or an incentive stock option (“ISO”), is not a taxable event for the optionee, and the Company obtains no deduction for the grant of the option.  Note, however, that under new Section 409A of the Internal Revenue Code, which is generally effective January 1, 2005, options granted at a discount from fair market value may be considered “deferred compensation” subject to adverse tax consequences, including immediate income tax upon the vesting of the option (whether or not exercised) and a 20% tax penalty (plus applicable state penalties).

 

Nonqualified or Nonstatutory Stock Options

 

The exercise of an NSO is a taxable event to the optionee.  The amount by which the fair market value of the shares on the date of exercise exceeds the exercise price (the “spread”) will be taxed to the optionee as ordinary income.  The spread will also be considered “wages” for purposes of FICA taxes.  The Company will be entitled to a deduction in the same amount as the ordinary income recognized by the optionee from the exercise of the option that is reported to the IRS by the optionee or the Company.  In general, the optionee’s tax basis in the shares acquired by exercising an NSO is equal to the fair market value of such shares on the date of exercise.  Upon a subsequent sale of any such shares in a taxable transaction, the optionee will realize capital gain or loss (long-term or short-term, depending on whether the shares were held for the required holding period before the sale) in an amount equal to the difference between his or her basis in the shares and the sale price.

 

Internal Revenue Service regulations generally provide that, for the purpose of avoiding federal tax penalties, a taxpayer may rely only on formal written advice meeting specific requirements.  The tax discussion in this document does not meet those requirements.  Accordingly, the tax discussion was not intended or written to be used, and it cannot be used, for the purpose of avoiding federal tax penalties that may be imposed on you.  Further, the tax discussion in this document could be considered to support the promotion or marketing of the transaction or matter discussed herein.  You and any other person reading the tax discussion should seek advice based on his, her or its particular circumstances from an independent tax advisor.

 

B-1



 

The capital gains holding periods are complex.  If shares are held for more than one year, the maximum tax rate on the gain has been reduced from twenty percent (20%) to fifteen percent (15%) for gain recognized on or after May 6, 2003, and before January 1, 2011.  Because the rules are complex and can vary in individual circumstances, each participant should consider consulting his or her own tax advisor.

 

If an optionee exercises an NSO and pays the exercise price with previously acquired shares of stock, special rules apply.  The transaction is treated as a tax-free exchange of the old shares for the same number of new shares, except as described below with respect to shares acquired pursuant to ISOs.  The optionee’s basis in the new shares is the same as his or her basis in the old shares, and the capital gains holding period runs without interruption from the date when the old shares were acquired.  The value of any new shares received by the optionee in excess of the number of old shares surrendered minus any cash the optionee pays for the new shares will be taxed as ordinary income.  The optionee’s basis in the additional shares is equal to the fair market value of such shares on the date the shares were transferred, and the capital gain holding period commences on the same date.  The effect of these rules is to defer recognition of any gain in the old shares when those shares are used to buy new shares.  Stated differently, these rules allow an optionee to finance the exercise of an NSO by using shares of stock that he or she already owns, without paying current tax on any unrealized appreciation in those old shares.

 

Incentive Stock Options

 

The holder of an ISO will not be subject to U.S. federal income tax upon the exercise of the ISO, and the Company will not be entitled to a tax deduction by reason of such exercise, provided that the holder is employed by the Company on the exercise date (or the holder’s employment terminated within the three (3) months preceding the exercise date).  Exceptions to this exercise timing requirement apply in the event the optionee dies or becomes disabled.  A subsequent sale of the shares received upon the exercise of an ISO will result in the realization of long-term capital gain or loss in the amount of the difference between the amount realized on the sale and the exercise price for such shares, provided that the sale occurs more than one (1) year after the exercise of the ISO and more than two (2) years after the grant of the ISO.  In general, if a sale or disposition of the shares occurs prior to satisfaction of the foregoing holding periods (referred to as a “disqualifying disposition”), the optionee will recognize ordinary income and the Company will be entitled to a corresponding deduction, generally equal to the amount of ordinary income recognized by the optionee from the disqualifying disposition that is reported to the IRS by the optionee or the Company.

 

Favorable tax treatment is accorded to an optionee only to the extent that the value of the shares (determined at the time of grant) covered by an ISO first exercisable in any single calendar year does not exceed one hundred thousand dollars ($100,000).  If ISOs for shares whose aggregate value exceeds one hundred thousand dollars ($100,000) become exercisable in the same calendar year, the excess will be treated as NSOs.

 

A special rule applies if an optionee pays all or part of the exercise price of an ISO by surrendering shares of stock that he or she previously acquired by exercising any other ISO.  If the optionee has not held the old shares for the full duration of the applicable holding periods,

 

INVITAE CORPORATION
EXHIBIT B TO STOCK OPTION AGREEMENT
U.S. FEDERAL TAX INFORMATION

 

B-2



 

then the surrender of such shares to fund the exercise of the new ISO will be treated as a disqualifying disposition of the old shares.  As described above, the result of a disqualifying disposition is the loss of favorable tax treatment with respect to the acquisition of the old shares pursuant to the previously exercised ISO.

 

Where the applicable holding period requirements have been met, the use of previously acquired shares of stock to pay all or a portion of the exercise price of an ISO may offer significant tax advantages.  In particular, a deferral of the recognition of any appreciation in the surrendered shares is available in the same manner as discussed above with respect to NSOs.

 

Alternative Minimum Tax

 

Alternative minimum tax is paid when such tax exceeds a taxpayer’s regular U.S. federal income tax.  Alternative minimum tax is calculated based on alternative minimum taxable income, which is taxable income for U.S. federal income tax purposes, modified by certain adjustments and increased by tax preference items.

 

The “spread” under an ISO—that is, the difference between (a) the fair market value of the shares of stock at exercise and (b) the exercise price—is classified as alternative minimum taxable income for the year of exercise.  Alternative minimum taxable income may be subject to the alternative minimum tax.  However, if the shares of stock purchased upon the exercise of an ISO are sold in the same taxable year in which they are acquired, then the amount includible in the taxpayer’s alternative minimum taxable income will in no event exceed the amount realized upon such sale less the option exercise price paid for those shares.

 

In general, when a taxpayer sells stock acquired through the exercise of an ISO, only the difference between the fair market value of the shares on the date of exercise and the date of sale is used in computing any alternative minimum tax for the year of the sale.  The portion of a taxpayer’s alternative minimum tax attributable to certain items of tax preference (including the spread upon the exercise of an ISO) can be credited against the taxpayer’s regular liability in later years subject to certain limitations.

 

Withholding Taxes

 

Exercise of an NSO produces taxable income which is subject to withholding.  The Company will not deliver shares to the optionee unless the optionee has agreed to satisfactory arrangements for meeting all applicable U.S. federal, state and local withholding tax requirements.

 

U.S. federal tax law does not require unrecognized gain on exercise of an ISO to be treated as “wages” for the purposes of FICA taxes.

 

THIS TAX SUMMARY IS GENERAL IN NATURE AND SHOULD NOT BE RELIED UPON BY ANY PERSON IN DECIDING WHETHER OR WHEN TO EXERCISE AN OPTION.  EACH PERSON SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THESE MATTERS.

 

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EX-10.4 8 filename8.htm

Exhibit 10.4

 

Early Exercise

 

Legend for Merging:

 

[AAAA] = Date of Grant

[BBBB] = Name of Optionee

[CCCC] = Number of Shares

[DDDD] = Exercise Price

[EEEE] = Vesting Start Date

[FFFF] = Type of Option (i.e., ISO or NSO)

 

Other Actions:

 

·                  Confirm use of this form is for an option grant with early exercise features

·                  Confirm or modify Vesting Schedule below (in this Notice of Stock Option Grant), including any acceleration features if applicable

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE AND APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL AND STATE AND APPLICABLE FOREIGN SECURITIES LAWS IS NOT REQUIRED.

 

INVITAE CORPORATION
2010 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

 

InVitae Corporation (f/k/a Locus Development, Inc.) (the “Company”) hereby grants you the following Option to purchase shares of its common stock (“Shares”).  The terms and conditions of this Option are set forth in the Stock Option Agreement and the InVitae Corporation 2010 Stock Incentive Plan (the “Plan”), both of which are attached to and made a part of this document.

 

Date of Grant:

 

[AAAA]

 

 

 

Name of Optionee:

 

[BBBB]

 

 

 

Number of Option Shares:

 

[CCCC]

 

 

 

Exercise Price per Share:

 

$[DDDD] (The Exercise Price per Share of an Option shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. If Optionee is a Ten-Percent Stockholder, the Exercise Price per Share of an ISO must be at least one hundred ten percent (110%) of Fair Market Value.)

 

INVITAE CORPORATION
NOTICE OF STOCK OPTION GRANT

 

1



 

Vesting Start Date:

 

[EEEE]

 

 

 

Type of Option:

 

[FFFF]

 

 

 

Vesting Schedule:

 

Subject to the terms and conditions set forth in Section 2 of the Stock Option Agreement, the Option vests with respect to the first 25% of the Shares when the Optionee completes 12 months of continuous Service after the Vesting Start Date, and with respect to an additional 1/48th of the Shares when the Optionee completes each full month of continuous Service thereafter.

 

By signing this document, you acknowledge receipt of a copy of the Plan, and agree that:  (a) you have carefully read, fully understand and agree to all of the terms and conditions described in the attached Stock Option Agreement, the Plan document and “Notice of Exercise and Common Stock Purchase Agreement” (the “Exercise Notice”); (b) you hereby make the purchaser’s investment representations contained in the Exercise Notice with respect to the grant of this Option; (c) you understand and agree that the Stock Option Agreement, including its cover sheet and attachments, constitutes the entire understanding between you and the Company regarding this Option, and that any prior agreements, commitments or negotiations concerning this Option are replaced and superseded; and (d) you have been given an opportunity to consult your own legal and tax counsel with respect to all matters relating to this Option prior to signing this cover sheet and that you have either consulted such counsel or voluntarily declined to consult such counsel.

 

[BBBB]

 

INVITAE CORPORATION

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

Its:

 

 

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INVITAE CORPORATION

 

2010 STOCK INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

SECTION 1.                         KIND OF OPTION.

 

This Option is intended to be either an incentive stock option intended to meet the requirements of Section 422 of the Internal Revenue Code (an “ISO”) or a non-statutory option (an “NSO”), which is not intended to meet the requirements of an ISO, as indicated in the Notice of Stock Option Grant.  Even if this Option is designated as an ISO, it shall be deemed to be an NSO to the extent required by the $100,000 annual limitation under Section 422(d) of the Code.

 

SECTION 2.                         VESTING.

 

Subject to the terms and conditions of the Plan and this Stock Option Agreement (the “Agreement”), your Option and the Shares shall vest in accordance with the schedule set forth in the Notice of Stock Option Grant.  If your Option is granted in consideration of your Service as an Employee or a Consultant, after your Service as an Employee or a Consultant terminates for any reason, vesting of your Shares subject to such Option immediately stops and such Option expires immediately as to the number of Shares that are not vested as of the date your Service as an Employee or a Consultant terminates.  If your Option is granted in consideration of your Service as an Outside Director, after your Service as an Outside Director terminates for any reason, vesting of your Shares subject to such Option immediately stops and such Option expires immediately as to the number of Shares that are not vested as of the date your Service as an Outside Director terminates.

 

SECTION 3.                         TERM.

 

Your Option will expire in any event at the close of business at Company headquarters on the date that is ten (10) years after the Date of Grant; provided, however, that if your Option is an ISO it will expire five (5) years after the Date of Grant if you are a Ten-Percent Stockholder of the Company (the “Expiration Date”).  Also, your Option will expire earlier if your Service terminates, as described below.

 

SECTION 4.                         REGULAR TERMINATION.

 

(a)                                 If your Service terminates for any reason except death or Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date three (3) months after your termination of Service.  During that three (3) month period, you may exercise the portion of your Option that was vested on your termination date.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

 

INVITAE CORPORATION
STOCK OPTION AGREEMENT

 

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(b)                                 If your Option is an ISO and you exercise it more than three months after termination of your Service as an Employee for any reason other than death or Disability expected to result in death or to last for a continuous period of at least twelve (12) months, your Option will cease to be eligible for ISO tax treatment.

 

(c)                                  Your Option will cease to be eligible for ISO tax treatment if you exercise it more than three (3) months after the ninetieth (90th) day of a bona fide leave of absence approved by the Company, unless you return to employment immediately upon termination of such leave or your right to reemployment after your leave was guaranteed by statute or contract.

 

SECTION 5.                         DEATH.

 

If you die while in Service with the Company, the vested portion of your Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of your death.  During that twelve (12) month period, your estate, legatees or heirs may exercise that portion of your Option that was vested on the date of your death.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

 

SECTION 6.                         DISABILITY.

 

(a)                                 If your Service terminates because of a Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date twelve (12) months after your termination date.  During that twelve (12) month period, you may exercise that portion of your Option that was vested on the date of your Disability.  “Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

 

(b)                                 If your Option is an ISO and your Disability is not expected to result in death or to last for a continuous period of at least twelve (12) months, your Option will be eligible for ISO tax treatment only if it is exercised within three (3) months following the termination of your Service as an Employee.

 

SECTION 7.                         EXERCISING YOUR OPTION.

 

To exercise your Option, you must execute the Notice of Exercise and Common Stock Purchase Agreement (the “Exercise Notice”), attached as Exhibit A.  You must submit this form, together with full payment, to the Company.  Your exercise will be effective when it is received by the Company.  If you exercise your Option prior to vesting as provided in Section 8, you must also sign an Assignment Separate from Certificate attached as Exhibit C.  If someone else wants to exercise your Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

 

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SECTION 8.                         EXERCISE OF OPTION BEFORE VESTING.

 

If you wish, you may exercise your Option before it is vested (“Early Exercise”).  The Company may in its sole and absolute discretion prohibit you from undertaking an Early Exercise at any time prior to the expiration of six (6) months from the Date of Grant.  Your Option Shares will be subject to a repurchase right which shall lapse according to the same vesting schedule applicable had you not exercised your Option.  The repurchase right allows the Company to repurchase the unvested Shares for the Exercise Price.  If you exercise this Option before it is vested, you should consider making an election under Section 83(b) of the Internal Revenue Code (the “83(b) Election”), a form of which can be found on page E-3 of Exhibit E.  Please review the document entitled “U.S. Federal Tax Information” attached as Exhibit F.  A general explanation of Early Exercise can be found on page F-3 of Exhibit FThe 83(b) Election must be filed within thirty (30) days after the date you exercise all or any portion of your Option in which you are not vested.

 

YOU SHOULD CONSULT A TAX AND/OR FINANCIAL ADVISOR BEFORE EXERCISING PRIOR TO VESTING.

 

SECTION 9.                         PAYMENT FORMS.

 

When you exercise your Option, you must include payment of the Exercise Price for the Shares you are purchasing in cash or cash equivalents.  Alternatively, you may pay all or part of the Exercise Price by surrendering, or attesting to ownership of, Shares already owned by you, unless such action would cause the Company to recognize any (or additional) compensation expense with respect to the Option for financial reporting purposes.  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 of Option exercise.  To the extent that a public market for the Shares exists and to the extent permitted by applicable law, in each case as determined by the Company, you also may exercise your Option by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price and, if requested, applicable withholding taxes.  The Company will provide the forms necessary to make such a cashless exercise.  The Board may permit such other payment forms as it deems appropriate, subject to applicable laws, regulations and rules.

 

SECTION 10.                  TAX WITHHOLDING AND REPORTING.

 

(a)                                 You will not be allowed to exercise this Option unless you pay, or make acceptable arrangements to pay, any taxes required to be withheld as a result of the Option exercise or the sale of Shares acquired upon exercise of this Option.  You hereby authorize withholding from payroll or any other payment due you from the Company or your employer to satisfy any such withholding tax obligation.

 

(b)                                 If you sell or otherwise dispose of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the

 

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exercise date, you shall immediately notify the Company in writing of such disposition.

 

(c)                                  By signing this Agreement, you explicitly and unambiguously consent and agree to assume any liability for fringe benefit tax that may be payable by the Company and/or your employer in connection with this Option to the extent permitted under applicable law.  Further, by signing this Agreement, you agree that the Company and/or your employer may collect the fringe benefit tax from you by any reasonable method established by the Company and/or your employer.  You further agree to execute any other consents or elections required to accomplish the above, promptly upon request of the Company and/or your employer.

 

SECTION 11.                  RIGHT OF FIRST REFUSAL.

 

In the event that you propose 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 a “Right of First Refusal” with respect to such Shares in accordance with the provisions of the Exercise Notice.

 

SECTION 12.                  RESALE RESTRICTIONS/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 U.S. Securities Act of 1933, as amended, including the Company’s initial public offering, you may be prohibited from engaging in any transaction with respect to any of the Company’s common stock without the prior written consent of the Company or its underwriters in accordance with the provisions of the Exercise Notice.

 

SECTION 13.                  TRANSFER OF OPTION.

 

Prior to your death, only you may exercise this Option.  This Option and the rights and privileges conferred hereby cannot 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.  For instance, you may not sell this Option or use it as security for a loan.  If you attempt to do any of these things, this Option will immediately become invalid.  You may, however, dispose of this Option in your will.  Regardless of any marital property settlement agreement, the Company is not obligated to honor an Exercise Notice from your spouse or former spouse, nor is the Company obligated to recognize such individual’s interest in your Option in any other way. Notwithstanding the foregoing, however, to the extent permitted by the Board in its sole discretion, an NSO may be transferred by you to a revocable trust or to one or more family members or to a trust established for your benefit and/or one or more of your family members to the extent permitted by the Plan.

 

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SECTION 14.                  RETENTION RIGHTS.

 

This Agreement does not give you the right to be retained by the Company in any capacity.  The Company reserves the right to terminate your Service at any time and for any reason without thereby incurring any liability to you.

 

SECTION 15.                  STOCKHOLDER RIGHTS.

 

Neither you nor your estate or heirs have any rights as a stockholder of the Company until a certificate for the Shares acquired upon exercise of this Option has been issued.  No adjustments are made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.

 

SECTION 16.                  ADJUSTMENTS.

 

In the event of a stock split, a stock dividend or a similar change in the Company’s Stock, the number of Shares covered by this Option and the Exercise Price per share may be adjusted pursuant to the Plan.  Your Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity as set forth in the Plan.

 

SECTION 17.                  LEGENDS.

 

All certificates representing the Shares issued upon exercise of this Option shall, where applicable, have endorsed thereon the following legends:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL, STATE AND FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL, STATE AND FOREIGN SECURITIES LAWS IS NOT REQUIRED.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF.  SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES AND CERTAIN REPURCHASE RIGHTS IN FAVOR OF THE COMPANY.  THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST

 

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FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.

 

If the Option is an ISO, then the following legend should be included:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY OF THE DATE ON WHICH THE OPTION WAS EXERCISED.  THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF THE SHARES ARE TRANSFERRED BEFORE SUCH DATE.

 

SECTION 18.                  TAX DISCLAIMER.

 

You agree that you are responsible for consulting your own tax advisor as to the tax consequences associated with your Option.  The tax rules governing options are complex, change frequently and depend on the individual taxpayer’s situation.  For your information, a memorandum that briefly summarizes current U.S. federal income tax law relating to certain aspects of stock options is attached hereto as Exhibit F.  Please note that this memorandum does not purport to be complete.  Although the Company will make available to you general tax information about stock options, you agree that the Company shall not be held liable or responsible for making such information available to you or for any tax or financial consequences that you may incur in connection with your Option.

 

In addition, as noted in Exhibit F, options granted at a discount from fair market value may be considered “deferred compensation” subject to adverse tax consequences under new Section 409A of the Internal Revenue Code, which is generally effective January 1, 2005.  The Board has made a good faith determination that the exercise price per share of the Option is not less than the fair market value of the Shares underlying your Option on the Date of Grant.  It is possible, however, that the Internal Revenue Service could later challenge that determination and assert that the fair market value of the Shares underlying your Option was greater on the Date of Grant than the exercise price determined by the Board, which could result in immediate income tax upon the vesting of your Option (whether or not exercised) and a 20% tax penalty (plus applicable state penalties), as well as the loss of incentive stock option status (if applicable).  The Company gives no assurance that such adverse tax consequences will not occur and specifically assumes no responsibility therefor.  By accepting this Option, you acknowledge that any tax liability or other adverse tax consequences to you resulting from the grant of the Option will be the responsibility of, and will be borne entirely by, you.  YOU ARE THEREFORE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR BEFORE ACCEPTING THE GRANT OF THIS OPTION.

 

SECTION 19.                  THE PLAN AND OTHER AGREEMENTS.

 

The text of the Plan is incorporated in this Agreement by reference.  Certain capitalized terms used in this Agreement are defined in the Plan.  The Notice of Stock Option Grant, this Agreement, including its attachments, and the Plan constitute the entire understanding between

 

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you and the Company regarding this Option.  Any prior agreements, commitments or negotiations concerning this Option are superseded.

 

SECTION 20.                  MISCELLANEOUS PROVISIONS.

 

(a)                                 You understand and acknowledge that: (i) the Plan is entirely discretionary; (ii) the Company and your employer have reserved the right to amend, suspend or terminate the Plan at any time; (iii) the grant of an option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount; and (iv) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares offered, the Exercise Price and the vesting schedule, will be at the sole discretion of the Company.

 

(b)                                 The value of this Option shall be an extraordinary item of compensation outside the scope of your employment contract, if any, and shall not be considered a part of your normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

(c)                                  You understand and acknowledge that participation in the Plan ceases upon termination of your Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

 

(d)                                 You hereby authorize and direct your employer to disclose to the Company or any Subsidiary any information regarding your employment, the nature and amount of your compensation and the fact and conditions of your participation in the Plan, as your employer deems necessary or appropriate to facilitate the administration of the Plan.

 

(e)                                  You consent to the collection, use and transfer of personal data as described in this Subsection.  You understand and acknowledge that the Company, your employer and the Company’s other Subsidiaries hold certain personal information regarding you for the purpose of managing and administering the Plan, including (without limitation) your name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (the “Data”).  You further understand and acknowledge that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan.  You understand and acknowledge that the recipients of Data may be located in the United States or elsewhere.  You authorize such recipients to receive, possess, use, retain and transfer Data, in electronic or other

 

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form, for the purpose of administering your participation in the Plan, including a transfer to any broker or other third party with whom you elect to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf.  You may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection by contacting the Human Resources Department of the Company in writing.

 

SECTION 21.                  APPLICABLE LAW.

 

This Agreement will be interpreted and enforced under the laws of the State of California (without regard to their choice of law provisions).

 

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EXHIBIT A

 

INVITAE CORPORATION 2010 STOCK INCENTIVE PLAN
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

 

THIS AGREEMENT is dated as of                  ,       , between InVitae Corporation (the “Company”), and [BBBB] (“Purchaser”).

 

W I T N E S S E T H:

 

WHEREAS, the Company granted Purchaser a stock option on [AAAA] (the “Date of Grant”) pursuant to a stock option agreement (the “Option Agreement”) under which Purchaser has the right to purchase up to [CCCC] shares of the Company’s common stock (the “Option Shares”); and

 

WHEREAS, the Option is exercisable with respect to certain of the Option Shares as of the date hereof; and

 

WHEREAS, pursuant to the Option Agreement, Purchaser desires to purchase shares of the Company as herein described, on the terms and conditions set forth in this Agreement, the Option Agreement and the InVitae Corporation 2010 Stock Incentive Plan (the “Plan”).  Certain capitalized terms used in this Agreement are defined in the Plan.

 

NOW, THEREFORE, it is agreed between the parties as follows:

 

SECTION 1.                                     PURCHASE OF SHARES.

 

(a)                                 Pursuant to the terms of the Option Agreement, Purchaser hereby agrees to purchase from the Company and the Company agrees to sell and issue to Purchaser               shares of the Company’s common stock (the “Common Stock”) for the Exercise Price per share specified in the Notice of Stock Option Grant payable by personal check, cashier’s check, money order or otherwise as permitted by the Option Agreement.  Payment shall be delivered at the Closing, as such term is defined below.

 

(b)                                 The closing (the “Closing”) under this Agreement shall occur at the offices of the Company as of the date hereof, or such other time and place as may be designated by the Company (the “Closing Date”).

 

SECTION 2.                                     REPURCHASE RIGHT.

 

All shares of Common Stock purchased by Purchaser pursuant to this Agreement that have not vested under the terms of the Option Agreement, together with any shares of Common Stock issued as a dividend or other distribution on, in exchange for or upon the conversion of such unvested Stock (collectively, the “Subject Shares”) shall be subject to the following right of repurchase by the Company (the “Repurchase Right”).

 

INVITAE CORPORATION

EXHIBIT A TO STOCK OPTION AGREEMENT

NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

 

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SECTION 3.                                     EXERCISE OF REPURCHASE RIGHT.

 

Upon termination of Purchaser’s Services to the Company (the “Termination Date”), the Company shall have the right to purchase from Purchaser all Subject Shares as of the Termination Date.  The Company shall be deemed to have exercised its Repurchase Right automatically for all Subject Shares as of the Termination Date, unless within ninety (90) days thereafter, the Company notifies the holder of the Subject Shares pursuant to Section 16 that it will not exercise its Repurchase Rights as to some or all of the Subject Shares.

 

The repurchase price per share shall be the lower of (i) the Exercise Price per share paid by Purchaser for such shares pursuant to this Agreement and (ii) the Fair Market Value per share on the Termination Date.  The Repurchase Right shall lapse with respect to the Subject Shares in accordance with the vesting schedule in the Option Agreement.

 

The certificate(s) representing the shares to be repurchased shall be delivered to the Company properly endorsed for transfer.  The Company shall, concurrently with the receipt of such certificate(s), pay to Purchaser the repurchase price determined according to Section 2, above.  The repurchase price shall be paid, at the option of the Company, by cancellation of all or a portion of outstanding indebtedness, if any, or in cash or both.

 

SECTION 4.                                     WAIVER, ASSIGNMENT, EXPIRATION OF REPURCHASE RIGHT.

 

If the Company determines not to exercise the Repurchase Right as to all or a portion of the Subject Shares, the Company may, in the discretion of its Board of Directors, assign the Repurchase Right to any other holder or holders of preferred or common stock of the Company in such proportions as such Board of Directors may determine.  In the event of such an assignment, the Board may require that the assignee pay to the Company in cash an amount equal to the fair market value of the Repurchase Right.  The Company shall promptly, prior to expiration of the ninety (90) day period referred to in Section 3 above, notify Purchaser of the number of Subject Shares subject to the Repurchase Right assigned to such stockholders and shall notify both Purchaser and the assignees of the time, place and date for settlement of such purchase, which must be made within ninety (90) days from the Termination Date.  In the event that the Company and/or such assignees elect not to exercise the Repurchase Right as to all or part of the Subject Shares, the Repurchase Right shall expire as to all shares which the Company and/or such assignees have elected not to purchase.

 

SECTION 5.                                     ESCROW OF SHARES.

 

(a)                                 To ensure that Purchaser’s unvested Shares are delivered to the Company upon its exercise of its Repurchase Right, Purchaser agrees at the Closing under this Agreement, to deliver to and deposit with the escrow agent (the “Escrow Agent”) named in the Joint Escrow Instructions attached as Exhibit B, the certificate(s) evidencing the unvested Shares and an Assignment Separate from Certificate executed by Purchaser (with date and number of shares in blank) in the form attached as Exhibit C.  The certificate(s) evidencing the unvested Shares and the Assignment Separate from Certificate shall be delivered to the Escrow Agent and

 

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held under the Joint Escrow Instructions, which shall be delivered to the Escrow Agent at the Closing under this Agreement.

 

(b)                                 Within thirty (30) days after the last day of each successive completed calendar quarter after the Closing Date, if Purchaser so requests, the Escrow Agent shall deliver to Purchaser certificates representing so many shares of Common Stock as are no longer subject to the Repurchase Right (less such shares as have been previously delivered).  Ninety (90) days after the Termination Date, the Company shall direct the Escrow Agent to deliver to Purchaser a certificate or certificates representing the number of shares not repurchased by the Company or its assignees pursuant to exercise of the Repurchase Right (less such shares as have been previously delivered).

 

SECTION 6.                                     ADJUSTMENT OF SHARES.

 

Subject to the provisions of the Certificate of Incorporation of the Company, if (a) there is any stock dividend or liquidating dividend of cash and/or property, stock split or other change in the character or amount of any of the outstanding securities of the Company, or (b) there is any consolidation, merger or sale of all or substantially all of the assets of the Company, then, in such event, any and all new, substituted or additional securities or other cash or property to which Purchaser is entitled by reason of Purchaser’s ownership of the shares shall be immediately subject to the Repurchase Right and the Right of First Refusal, as defined below, with the same force and effect as the shares subject to the Repurchase Right and the Right of First Refusal.  While the total repurchase price shall remain the same after each such event, the repurchase price per share upon exercise of the Repurchase Right shall be appropriately and equitably adjusted as determined by the Board of Directors of the Company.  Appropriate adjustments shall also be made to the number and/or class of shares subject to the Repurchase Right and the Right of First Refusal to reflect the exchange or distribution of such securities.  In the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Repurchase Right and Right of First Refusal may be exercised by the Company’s successor.

 

SECTION 7.                                     THE COMPANY’S RIGHT OF FIRST REFUSAL.

 

Before any shares of Common Stock registered in the name of Purchaser may be sold or transferred, such shares shall first be offered to the Company as follows (the “Right of First Refusal”):

 

(a)                                 Purchaser shall promptly deliver a notice (“Notice”) to the Company stating: (i) Purchaser’s bona fide intention to sell or transfer such shares; (ii) the number of such shares to be sold or transferred, and the basic terms and conditions of such sale or transfer; (iii) the price for which Purchaser proposes to sell or transfer such shares; (iv) the name of the proposed purchaser or transferee; and (v) proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable U.S. federal, state or foreign securities laws.  The Notice shall be signed by both Purchaser and the proposed purchaser or transferee and must

 

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constitute a binding commitment subject to the Company’s Right of First Refusal as set forth herein.

 

(b)                                 Within thirty (30) days after receipt of the Notice, the Company may elect to purchase all or any portion of the shares to which the Notice refers, at the price per share specified in the Notice.  If the Company elects not to purchase all or any portion of the shares, the Company may assign its right to purchase all or any portion of the shares.  The assignees may elect within thirty (30) days after receipt by the Company of the Notice to purchase all or any portion of the shares to which the Notice refers, at the price per share specified in the Notice.  An election to purchase shall be made by written notice to Purchaser.  Payment for shares purchased pursuant to this Section 7 shall be made within thirty (30) days after receipt of the Notice by the Company and, at the option of the Company, may be made by cancellation of all or a portion of outstanding indebtedness, if any, or in cash or both.

 

(c)                                  If all or any portion of the shares to which the Notice refers are not elected to be purchased, as provided in Section 7(b), Purchaser may sell those shares to any person named in the Notice at the price specified in the Notice, provided that such sale or transfer is consummated within sixty (60) days of the date of said Notice to the Company, and provided, further, that any such sale is made in compliance with applicable U.S. federal, state and foreign securities laws and not in violation of any other contractual restrictions to which Purchaser is bound.  The third-party purchaser shall be bound by, and shall acquire the shares of stock subject to, the provisions of this Agreement, including the Company’s Right of First Refusal.

 

(d)                                 Any proposed transfer on terms and conditions different from those set forth in the Notice, as well as any subsequent proposed transfer shall again be subject to the Company’s Right of First Refusal and shall require compliance with the procedures described in this Section 7.

 

(e)                                  Purchaser agrees to cooperate affirmatively with the Company, to the extent reasonably requested by the Company, to enforce rights and obligations pursuant to this Agreement.

 

(f)                                   Notwithstanding the above, neither the Company nor any assignee of the Company under this Section 7 shall have any right under this Section 7 at any time subsequent to the closing of a public offering of the common stock of the Company pursuant to a registration statement declared effective under the U.S. Securities Act of 1933, as amended (the “Securities Act”).

 

(g)                                  This Section 7 shall not apply to (i) a transfer by will or intestate succession, or (ii) a transfer to one or more members of Purchaser’s Immediate Family (defined below) or to a trust established by Purchaser for the benefit of Purchaser and/or one or more members of Purchaser’s Immediate Family, provided that the transferee agrees in writing on a form prescribed by the Company to be bound by

 

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all of the provisions of this Agreement to the same extent as they apply to Purchaser.  The transferee shall execute a copy of the attached Exhibit D and file the same with the Secretary of the Company.

 

SECTION 8.                                     PURCHASER’S RIGHTS AFTER EXERCISE OF REPURCHASE RIGHT OR RIGHT OF FIRST REFUSAL.

 

If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Common Stock to be repurchased in accordance with the provisions of Sections 2 and 7 of this Agreement, then from and after such time the person from whom such shares are to be repurchased 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 repurchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.

 

SECTION 9.                                     TRANSFER BY PURCHASER TO CERTAIN PEOPLE.

 

(a)                                 Notwithstanding anything herein to the contrary, Purchaser may not transfer, assign, encumber or otherwise dispose of any Subject Shares without the Company’s written consent, except that Purchaser may transfer Subject Shares to one or more members of Purchaser’s Immediate Family (as defined below), or to a trust established by Purchaser for the benefit of Purchaser and/or one or more members of Purchaser’s Immediate Family, provided that the transferee agrees in writing on a form prescribed by the Company to be bound by all of the provisions of this Agreement to the same extent as they apply to Purchaser.  The transferee shall execute a copy of Exhibit D and file the same with the Secretary of the Company.

 

(b)                                 For purposes of this Agreement, Immediate Family means 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.

 

SECTION 10.                              LEGEND OF SHARES.

 

All certificates representing the Common Stock purchased under this Agreement shall, where applicable, have endorsed thereon the following legends and any other legends required by applicable securities laws:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE AND APPLICABLE

 

A-5



 

FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL AND STATE AND APPLICABLE FOREIGN SECURITIES LAWS IS NOT REQUIRED.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF.  SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES AND CERTAIN REPURCHASE RIGHTS IN FAVOR OF THE COMPANY.  THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.

 

If the Option is an ISO, then the following legend should be included:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY OF THE DATE ON WHICH THE OPTION WAS EXERCISED.  THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF THE SHARES ARE TRANSFERRED BEFORE SUCH DATE.

 

SECTION 11.                              PURCHASER’S INVESTMENT REPRESENTATIONS.

 

(a)                                 This Agreement is made with Purchaser in reliance upon Purchaser’s representation to the Company, which by Purchaser’s acceptance hereof Purchaser confirms, that the Common Stock which Purchaser will receive will be acquired with Purchaser’s own funds for investment for an indefinite period for Purchaser’s own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting participation in, or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of Purchaser’s property shall at all times be within Purchaser’s control.  By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, understanding or agreement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any of the Common Stock.

 

(b)                                 Purchaser understands that the Common Stock will not be registered or qualified under applicable U.S. federal, state or foreign securities laws on the ground that

 

A-6



 

the sale provided for in this Agreement is exempt from registration or qualification under applicable U.S. federal, state or foreign securities laws and that the Company’s reliance on such exemption is predicated on Purchaser’s representations set forth herein.

 

(c)                                  Purchaser agrees that in no event shall Purchaser make a disposition of any of the Common Stock (including a disposition under Section 9 of this Agreement), unless and until: (i) Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition; and (ii) Purchaser shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (A) such disposition will not require registration or qualification of such Common Stock under applicable U.S. federal, state or foreign securities laws or (B) appropriate action necessary for compliance with the U.S. federal, state or foreign securities laws has been taken; or (iii) the Company shall have waived, expressly and in writing, its rights under clauses (i) and (ii) of this Subsection.

 

(d)                                 With respect to a transaction occurring prior to such date as the Plan and Common Stock thereunder are covered by a valid Form S-8 or similar U.S. federal registration statement, this Subsection shall apply unless the transaction is covered by the exemption in California Corporations Code Section 25102(o) or a similar broad-based exemption.  In connection with the investment representations made herein, Purchaser represents that Purchaser is able to fend for himself or herself in the transactions contemplated by this Agreement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Purchaser’s investment, has the ability to bear the economic risks of Purchaser’s investment and has been furnished with and has had access to such information as would be made available in the form of a registration statement together with such additional information as is necessary to verify the accuracy of the information supplied and to have all questions answered by the Company.

 

(e)                                  Purchaser understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the U.S. Securities Exchange Act of 1934, as amended, or if a registration statement covering the Common Stock (or a filing pursuant to the exemption from registration under Regulation A of the Securities Act) under the Securities Act is not in effect when Purchaser desires to sell the Common Stock, Purchaser may be required to hold the Common Stock for an indeterminate period.  Purchaser also acknowledges that Purchaser understands that any sale of the Common Stock which might be made by Purchaser in reliance upon Rule 144 under the Securities Act may be made only in limited amounts in accordance with the terms and conditions of that Rule.

 

A-7



 

SECTION 12.                              NO DUTY TO TRANSFER IN VIOLATION OF THIS AGREEMENT.

 

The Company shall not be required (a) to transfer on its books any shares of Common Stock of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

 

SECTION 13.                              RIGHTS OF PURCHASER.

 

(a)                                 Except as otherwise provided herein, Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Common Stock.

 

(b)                                 Nothing in this Agreement shall be construed as a right by Purchaser to be retained by the Company, or a parent or subsidiary of the Company in any capacity.  The Company reserves the right to terminate Purchaser’s Service at any time and for any reason without thereby incurring any liability to Purchaser.

 

SECTION 14.                              RESALE RESTRICTIONS/MARKET STAND-OFF.

 

Purchaser hereby agrees that 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, Purchaser shall not, directly or indirectly, engage in any transaction prohibited by the underwriter, or sell, make any short sale of, contract to sell, transfer the economic risk of ownership in, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any Common Stock without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or such underwriters.  Such period of time shall not exceed one hundred eighty (180) days; provided, however, that if either (a) during the last seventeen (17) days of such one hundred eighty (180) day period, the Company issues an earnings release or material news or a material event relating to the Company occurs or (b) prior to the expiration of such one hundred eighty (180) day period, the Company announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the one hundred eighty (180) day period, then the restrictions imposed during such one hundred eighty (180) day period shall continue to apply until the expiration of the eighteen (18) day period beginning on the issuance of the earnings release or the occurrence of the material news or material event; and provided, further, that in the event the Company or the underwriter requests that the one hundred eighty (180) day period be extended or modified pursuant to then-applicable law, rules, regulations or trading policies, the restrictions imposed during the one hundred eighty (180) day period shall continue to apply to the extent requested by the Company or the underwriter to comply with such law, rules, regulations or trading policies.  Purchaser hereby agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto.  To enforce the provisions of this Section, the

 

A-8


 

Company may impose stop-transfer instructions with respect to the Common Stock until the end of the applicable stand-off period.

 

SECTION 15.                              OTHER NECESSARY ACTIONS.

 

The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

 

SECTION 16.                              NOTICE.

 

Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon the earliest of personal delivery, receipt or the third full day following deposit in the United States Post Office with postage and fees prepaid, addressed to the other party hereto at the address last known or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto.

 

SECTION 17.                              SUCCESSORS AND ASSIGNS.

 

This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser and Purchaser’s heirs, executors, administrators, successors and assigns.  The failure of the Company in any instance to exercise the Repurchase Right or Right of First Refusal described herein shall not constitute a waiver of any other Repurchase Right or Right of First Refusal that may subsequently arise under the provisions of this Agreement.  No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of a like or different nature.

 

SECTION 18.                              APPLICABLE LAW.

 

This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such state.

 

SECTION 19.                              NO STATE QUALIFICATION.

 

THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE.  THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

 

A-9



 

SECTION 20.                              NO ORAL MODIFICATION.

 

No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto.

 

SECTION 21.                              ENTIRE AGREEMENT.

 

This Agreement, the Option Agreement and the Plan constitute the entire complete and final agreement between the parties hereto with regard to the subject matter hereof.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

 

INVITAE CORPORATION

 

[BBBB] (PURCHASER)

 

 

 

 

 

 

By:

 

 

 

 

 

 

Signature

Its:

 

 

 

 

A-10



 

EXHIBIT B

 

JOINT ESCROW INSTRUCTIONS

 

           ,        

 

To Secretary

InVitae Corporation

 

 

Dear Sir or Madam:

 

As Escrow Agent for InVitae Corporation (the “Company”), and [BBBB] (the “Purchaser”), you are authorized and directed to hold the Assignment Separate from Certificate form(s) executed by Purchaser and the certificate(s) of stock representing Purchaser’s unvested shares purchased in accordance with the terms of the notice of exercise and common stock purchase agreement (the “Agreement”) and stock option agreement (the “Option Agreement”) entered into between the Company and Purchaser, in accordance with the following instructions:

 

1.                                      In the event that the Company elects to exercise the Repurchase Right as described in Section 2 of the Agreement, Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated, and to promptly deliver the stock certificates.

 

2.                                      At the closing, you are directed: (a) to date the Assignment Separate from Certificate form(s) necessary for the transfer in question; (b) to fill in the number of shares being transferred; and (c) to deliver the form(s), together with the certificate or certificates evidencing the shares to be transferred, to the Company.  The Company shall simultaneously deliver to you the repurchase price for the number of shares being purchased pursuant to the exercise of the Repurchase Right.

 

3.                                      Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares to be held by you under this letter and any additions and substitutions to the shares as defined in the Agreement.  Purchaser irrevocably appoints you as his or her attorney-in-fact and agent for the term of this escrow to execute, with respect to the shares of stock, all documents necessary or appropriate to make such securities negotiable and to complete any transaction contemplated by these Joint Escrow Instructions.  Subject to the provisions of this Section 3, Purchaser shall exercise all rights and privileges, including but not limited to, the right to vote and to receive dividends (if any), of a stockholder of the Company while the shares are held by you.

 

4.                                      In accordance with the terms of Section 5 of the Agreement, you may, from time to time, deliver to Purchaser a certificate or certificates representing shares that are no longer subject to the Repurchase Right.

 

INVITAE CORPORATION

EXHIBIT B TO STOCK OPTION AGREEMENT

JOINT ESCROW INSTRUCTIONS

 

B-1



 

5.                                      This escrow shall terminate upon the release of all shares held under the terms and provisions hereof.

 

6.                                      If at the time of termination of this escrow you should have in your possession any documents, securities or other property belonging to Purchaser, you shall deliver them to Purchaser and shall be discharged from all further obligations under these Joint Escrow Instructions.

 

7.                                      Your duties under these Joint Escrow Instructions may be altered, amended, modified or revoked only by a writing signed by all of the parties.

 

8.                                      You shall be obligated to perform the duties described in these Joint Escrow Instructions and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties.  You shall not be personally liable for any act or omission as Escrow Agent or as attorney-in-fact of Purchaser while acting in good faith and in the exercise of your own good judgment, and any act or omission by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

 

9.                                      You are expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are expressly authorized to comply with and obey orders, judgments or decrees of any court.  In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties under these Joint Escrow Instructions or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

 

10.                               You shall not be liable in any respect on account of the identity, authority or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for under these Joint Escrow Instructions.

 

11.                               You shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.

 

12.                               You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations under these Joint Escrow Instructions and may rely upon the advice of such counsel.

 

13.                               Your responsibilities as Escrow Agent under these Joint Escrow Instructions shall terminate if you shall cease to be employed by the Company or if you shall resign by written notice to each party.  In the event of any such termination, the Company shall appoint any officer of the Company as successor Escrow Agent.

 

B-2



 

14.                               If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations under these Joint Escrow Instructions, the parties shall furnish such instruments.

 

15.                               It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you under these Joint Escrow Instructions, you are authorized and directed to retain in your possession without liability to anyone all or any part of the securities until the dispute is settled either by mutual written agreement of the parties or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected.  You are under no duty whatsoever to institute or defend against any such proceedings.

 

16.                               Any notice required or permitted under these Joint Escrow Instructions shall be given in writing and will be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties.

 

17.                               By signing these Joint Escrow Instructions, you become a party only for the purpose of these Joint Escrow Instructions; you do not become a party to the Agreement.

 

18.                               This instrument shall be governed by and construed in accordance with the laws of the State of California.

 

19.                               This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

 

 

Very truly yours,

 

 

 

 

 

INVITAE CORPORATION

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

ESCROW AGENT:

 

 

[BBBB] (PURCHASER)

 

 

 

 

 

 

 

 

 

 

 

 

Signature

 

 

Signature

 

INSTRUCTIONS:  YOU MUST SIGN THIS LETTER IF YOU ARE EXERCISING PRIOR TO VESTING (“EARLY EXERCISE”).  IF YOU ARE NOT EARLY EXERCISING, DO NOT COMPLETE THIS FORM.

 

B-3



 

EXHIBIT C

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED, [BBBB] sells, assigns and transfers to InVitae Corporation (the “Company”) or its assignee                    [print the number of shares] (                [# of shares]) shares of the Common Stock of the Company (the “Shares”), standing in his or her name on the books of the Company represented by Certificate No.                    and irrevocably constitutes and appoints the Secretary of the Company as Attorney to transfer the Shares on the books of the Company with full power of substitution in the premises.

 

Dated:                                     ,          .

 

 

 

 

[BBBB]

 

 

 

 

 

 

 

(Signature)

 

Spousal Consent (if applicable)

 

                                 (Purchaser’s spouse) indicates by the execution of this Assignment his or her consent to be bound by the terms herein as to his or her interests, whether as community property or otherwise, if any, in the Shares.

 

 

 

 

Printed Name

 

 

 

 

 

 

 

Signature

 

INSTRUCTIONS:  YOU MUST SIGN THIS FORM IF YOU ARE EXERCISING PRIOR TO VESTING (“EARLY EXERCISE”).  IF YOU ARE NOT EARLY EXERCISING, DO NOT COMPLETE THIS FORM.  PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.  THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS “REPURCHASE RIGHT” SET FORTH IN THE NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT WITHOUT REQUIRING ADDITIONAL SIGNATURES.

 

INVITAE CORPORATION

EXHIBIT C TO STOCK OPTION AGREEMENT

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

C-1



 

EXHIBIT D

 

ACKNOWLEDGMENT OF AND AGREEMENT TO BE BOUND
BY THE NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT OF
INVITAE CORPORATION

 

The undersigned, as transferee of shares of InVitae Corporation hereby acknowledges that he or she has read and reviewed the terms of the Notice of Exercise and Common Stock Purchase Agreement of InVitae Corporation and hereby agrees to be bound by the terms and conditions thereof, as if the undersigned had executed said Agreement as an original party thereto.

 

Dated:                                  ,        .

 

 

 

 

(Signature of Transferee)

 

 

 

 

 

 

 

(Printed Name of Transferee)

 

INVITAE CORPORATION

EXHIBIT D TO STOCK OPTION AGREEMENT

ACKNOWLEDGMENT OF AND AGREEMENT TO BE BOUND BY THE NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

 

D-1



 

EXHIBIT E

 

STEP-BY-STEP INSTRUCTIONS TO
MAKE A SECTION 83(b) ELECTION

 

WORD OF CAUTION: IF YOU CHOOSE TO FILE A SECTION 83(b) ELECTION, YOU MUST FILE YOUR SECTION 83(b) ELECTION FORM WITH THE IRS NO LATER THAN 30 DAYS FOLLOWING THE DATE ON WHICH YOU SIGN THE NOTICE OF EXERCISE (EXHIBIT A) AND PAY THE EXERCISE PRICE.  THE 30-DAY DEADLINE IS ABSOLUTE AND CANNOT BE WAIVED UNDER ANY CIRCUMSTANCES.  ALSO, ONCE FILED, YOUR SECTION 83(b) ELECTION FORM MAY NOT BE REVOKED, EXCEPT WITH THE CONSENT OF THE IRS (WHICH CONSENT IS GENERALLY DENIED).

 

THESE INSTRUCTIONS ARE DISTRIBUTED MERELY FOR CONVENIENCE IN THE EVENT YOU CHOOSE TO FILE AN 83(b) ELECTION.  THEY SHOULD NOT BE RELIED UPON BY ANY PERSON IN DECIDING WHETHER OR WHEN TO EXERCISE AN OPTION OR TO MAKE AN 83(b) ELECTION.  EACH PERSON SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THESE MATTERS.

 

Step 1.                                                           Complete and execute the 83(b) Form found on page E-4 of this Exhibit E (the “83(b) Form”).  Do not fill in the blank in paragraph 6, which relates to the fair market value of the property at the time of transfer.  Submit the 83(b) Form to the Company and ask that the Company insert the per share fair market value of the shares in paragraph 6 of the 83(b) Form.

 

Step 2.                                                           Make four copies of the executed and completed 83(b) Form.

 

Step 3.                                                           Mail: (a) the cover letter on page E-3; (b) the original executed 83(b) Form on page E-4; and (c) if you are exercising an ISO, the Special Election Form on page E-5 to the Internal Revenue Service Center where you file your U.S. federal income tax return.

 

PLEASE NOTE THAT IF YOU ARE EXERCISING AN ISO FOR UNVESTED SHARES, AN 83(b) ELECTION WILL NOT BE EFFECTIVE TO LIMIT THE AMOUNT OF ORDINARY INCOME THAT YOU MAY BE REQUIRED TO

 

Internal Revenue Service regulations generally provide that, for the purpose of avoiding federal tax penalties, a taxpayer may rely only on formal written advice meeting specific requirements.  The tax discussion in this document does not meet those requirements.  Accordingly, the tax discussion was not intended or written to be used, and it cannot be used, for the purpose of avoiding federal tax penalties that may be imposed on you.  Further, the tax discussion in this document could be considered to support the promotion or marketing of the transaction or matter discussed herein.  You and any other person reading the tax discussion should seek advice based on his, her or its particular circumstances from an independent tax advisor.

 

E-1



 

RECOGNIZE ON A DISQUALIFYING DISPOSITION, ACCORDING TO U.S. TREASURY REGULATIONS.  PLEASE SEE SUMMARY OF U.S. FEDERAL TAX INFORMATION AT EXHIBIT F AND CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE EARLY EXERCISE OF AN ISO.

 

The tax, if any, arising out of your election does not have to be paid until you file your tax return for the taxable year in which you purchased your option shares (except to the extent that withholding taxes or estimated taxes are payable).  The forms must be filed no later than 30 days following the date on which you sign the Notice of Exercise (Exhibit A) and pay the exercise price.  The 30-day deadline is absolute and cannot be waived under any circumstances.  The filing is deemed to be made on the date that the forms are mailed from the post office, i.e., the postmark date.  Mail the forms by registered or certified mail, return receipt requested, so that you have proof that you filed the forms within the 30-day period.  If you miss the deadline, you will be taxed on your option shares as they vest based on the value of the shares at that time.  Your 83(b) filing with the Internal Revenue Service is deemed to cause a similar election with the California Franchise Tax Board for California income tax purposes.  If you do not reside in California, you should seek local tax advice on whether you must make a separate filing with your state of residence.

 

Step 4.                                                           Mail or submit a copy of the filing with the Company on the same day that you file the 83(b) Form, and make sure that you retain copies of the forms for your records and for filing with your tax returns (see Step 5).

 

Step 5.                                                           File copies of the forms with your U.S. federal tax (and state tax, if appropriate) returns for the taxable year in which you purchased your option shares.

 

INVITAE CORPORATION

EXHIBIT E TO STOCK OPTION AGREEMENT

STEP-BY-STEP INSTRUCTIONS TO MAKE A SECTION 83(b) ELECTION

 

E-2


 

[BBBB]
[Optionee’s Address]

 

[Date]

 

VIA CERTIFIED MAIL

 

Return Receipt Requested

Receipt [enter receipt # here]

 

Internal Revenue Service Center

[Appropriate IRS center address]

 

Re:  Election Under Section 83(b) of the Internal Revenue Code

 

Ladies and Gentlemen:

 

Enclosed please find an executed form of election under Section 83(b) of the Internal Revenue Code of 1986 relating to the issuance of                    shares of InVitae Corporation Common Stock.

 

Also enclosed is a copy of the 83(b) election and a stamped, self-addressed envelope.  Please acknowledge receipt of these materials by stamping the enclosed copy of the 83(b) election with the date of receipt and returning it to me.

 

Thank you for your attention to this matter.

 

 

Very truly yours,

 

 

 

 

 

[BBBB]

 

Enclosures

 

cc:  InVitae Corporation w/ encs.

 

E-3



 

SECTION 83(b) ELECTION

 

This statement is being made under Section 83(b) of the Internal Revenue Code of 1986, pursuant to Treasury Regulation section 1.83-2.

 

1.  The taxpayer who performed the services is:

 

Name of Optionee: [BBBB]

 

Optionee’s Address:                      

 

Optionee’s Social Security Number:                             

 

2.  The property with respect to which the election is being made is                            shares of common stock of InVitae Corporation, a California corporation (the “Company”).

 

3.  The property was transferred on                             , 200    .  (Date of Exercise)

 

4.  The taxable year in which the election is being made is the calendar year 200    .

 

5.  If for any reason the taxpayer’s service with the issuer is terminated, the property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property at the original purchase price without interest.  The issuer’s repurchase right lapses in a series of installments over a               year period.

 

6.  The Fair Market Value of the property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $              per share.

 

7.  The amount paid for such property is $                            .

 

8.  A copy of this statement was furnished to the Company for whom the taxpayer rendered the service underlying the transfer of property.

 

9.  This statement is executed as of                                              , 200     .

 

 

 

 

 

Spouse (if any)

 

[BBBB]: Taxpayer

 

E-4



 

SPECIAL ELECTION PURSUANT TO SECTION 83(b)
OF THE INTERNAL REVENUE CODE WITH RESPECT TO PROPERTY
ACQUIRED UPON EXERCISE OF AN INCENTIVE STOCK OPTION

 

The property described in the above Section 83(b) election is comprised of shares of common stock acquired pursuant to the exercise of an Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  Accordingly, it is the intent of the Taxpayer to utilize this election to have the alternative minimum taxable income attributable to the purchased shares measured by the amount by which the fair market value of such shares at the time of their transfer to the Taxpayer exceeds the purchase price paid for the shares.  In the absence of this election, such alternative minimum taxable income would be measured by the spread between the fair market value of the purchased shares and the purchase price which exists on the various lapse dates in effect for the forfeiture restrictions applicable to such shares.

 

This election is intended to be effective to the full extent permitted under the Code.

 

E-5



 

EXHIBIT F

 

U.S. FEDERAL TAX INFORMATION

 

(Current as of August 2010)

 

The following memorandum briefly summarizes current U.S. federal income tax law.  The discussion is intended to be used solely for general information purposes and does not make specific representations to any participant.  A taxpayer’s particular situation may be such that some variation of the basic rules is applicable to him or her.  In addition, the U.S. federal income tax laws and regulations are revised frequently and may change again in the future.  Each participant is urged to consult a tax advisor, both with respect to U.S. federal income tax consequences as well as any foreign, state or local tax consequences, before exercising any option or before disposing of any shares of stock acquired under the Plan.

 

Initial Grant of Options

 

The grant of an option, whether a nonqualified or nonstatutory stock option (“NSO”) or an incentive stock option (“ISO”), is not a taxable event for the optionee, and the Company obtains no deduction for the grant of the option.  Note, however, that under new Section 409A of the Internal Revenue Code, which is generally effective January 1, 2005, options granted at a discount from fair market value may be considered “deferred compensation” subject to adverse tax consequences, including immediate income tax upon the vesting of the option (whether or not exercised) and a 20% tax penalty (plus applicable state penalties).

 

Nonqualified or Nonstatutory Stock Options

 

The exercise of an NSO is a taxable event to the optionee.  The amount by which the fair market value of the shares on the date of exercise exceeds the exercise price (the “spread”) will be taxed to the optionee as ordinary income.  The spread will also be considered “wages” for purposes of FICA taxes.  The Company will be entitled to a deduction in the same amount as the ordinary income recognized by the optionee from the exercise of the option that is reported to the IRS by the optionee or the Company.  In general, the optionee’s tax basis in the shares acquired by exercising an NSO is equal to the fair market value of such shares on the date of exercise.  Upon a subsequent sale of any such shares in a taxable transaction, the optionee will realize capital gain or loss (long-term or short-term, depending on whether the shares were held for the

 

Internal Revenue Service regulations generally provide that, for the purpose of avoiding federal tax penalties, a taxpayer may rely only on formal written advice meeting specific requirements.  The tax discussion in this document does not meet those requirements.  Accordingly, the tax discussion was not intended or written to be used, and it cannot be used, for the purpose of avoiding federal tax penalties that may be imposed on you.  Further, the tax discussion in this document could be considered to support the promotion or marketing of the transaction or matter discussed herein.  You and any other person reading the tax discussion should seek advice based on his, her or its particular circumstances from an independent tax advisor.

 

F-1



 

required holding period before the sale) in an amount equal to the difference between his or her basis in the shares and the sale price.

 

The capital gains holding periods are complex.  If shares are held for more than one year, the maximum tax rate on the gain is currently fifteen percent (15%) for gain recognized on or after May 6, 2003, and before January 1, 2011.  Because the rules are complex and can vary in individual circumstances, each participant should consider consulting his or her own tax advisor.

 

If an optionee exercises an NSO and pays the exercise price with previously acquired shares of stock, special rules apply.  The transaction is treated as a tax-free exchange of the old shares for the same number of new shares, except as described below with respect to shares acquired pursuant to ISOs.  The optionee’s basis in the new shares is the same as his or her basis in the old shares, and the capital gains holding period runs without interruption from the date when the old shares were acquired.  The value of any new shares received by the optionee in excess of the number of old shares surrendered minus any cash the optionee pays for the new shares will be taxed as ordinary income.  The optionee’s basis in the additional shares is equal to the fair market value of such shares on the date the shares were transferred, and the capital gain holding period commences on the same date.  The effect of these rules is to defer recognition of any gain in the old shares when those shares are used to buy new shares.  Stated differently, these rules allow an optionee to finance the exercise of an NSO by using shares of stock that he or she already owns, without paying current tax on any unrealized appreciation in those old shares.

 

Incentive Stock Options

 

The holder of an ISO will not be subject to U.S. federal income tax upon the exercise of the ISO, and the Company will not be entitled to a tax deduction by reason of such exercise, provided that the holder is employed by the Company on the exercise date (or the holder’s employment terminated within the three (3) months preceding the exercise date).  Exceptions to this exercise timing requirement apply in the event the optionee dies or becomes disabled.  A subsequent sale of the shares received upon the exercise of an ISO will result in the realization of long-term capital gain or loss in the amount of the difference between the amount realized on the sale and the exercise price for such shares, provided that the sale occurs more than one (1) year after the exercise of the ISO and more than two (2) years after the grant of the ISO.  In general, if a sale or disposition of the shares occurs prior to satisfaction of the foregoing holding periods (referred to as a “disqualifying disposition”), the optionee will recognize ordinary income and the Company will be entitled to a corresponding deduction, generally equal to the amount of ordinary income recognized by the optionee from the disqualifying disposition that is reported to the IRS by the optionee or the Company.

 

Favorable tax treatment is accorded to an optionee only to the extent that the value of the shares (determined at the time of grant) covered by an ISO first exercisable in any single calendar year does not exceed one hundred thousand dollars ($100,000).  If ISOs for shares whose aggregate value exceeds one hundred thousand dollars ($100,000) become exercisable in the same calendar year, the excess will be treated as NSOs.

 

INVITAE CORPORATION

EXHIBIT F TO STOCK OPTION AGREEMENT

U.S. FEDERAL TAX INFORMATION

 

F-2



 

A special rule applies if an optionee pays all or part of the exercise price of an ISO by surrendering shares of stock that he or she previously acquired by exercising any other ISO.  If the optionee has not held the old shares for the full duration of the applicable holding periods, then the surrender of such shares to fund the exercise of the new ISO will be treated as a disqualifying disposition of the old shares.  As described above, the result of a disqualifying disposition is the loss of favorable tax treatment with respect to the acquisition of the old shares pursuant to the previously exercised ISO.

 

Where the applicable holding period requirements have been met, the use of previously acquired shares of stock to pay all or a portion of the exercise price of an ISO may offer significant tax advantages.  In particular, a deferral of the recognition of any appreciation in the surrendered shares is available in the same manner as discussed above with respect to NSOs.

 

Alternative Minimum Tax

 

Alternative minimum tax is paid when such tax exceeds a taxpayer’s regular U.S. federal income tax.  Alternative minimum tax is calculated based on alternative minimum taxable income, which is taxable income for U.S. federal income tax purposes, modified by certain adjustments and increased by tax preference items.

 

The “spread” under an ISO—that is, the difference between (a) the fair market value of the shares of stock at exercise and (b) the exercise price—is classified as alternative minimum taxable income for the year of exercise.  Alternative minimum taxable income may be subject to the alternative minimum tax.  However, if the shares of stock purchased upon the exercise of an ISO are sold in the same taxable year in which they are acquired, then the amount includible in the taxpayer’s alternative minimum taxable income will in no event exceed the amount realized upon such sale less the option exercise price paid for those shares.

 

In general, when a taxpayer sells stock acquired through the exercise of an ISO, only the difference between the fair market value of the shares on the date of exercise and the date of sale is used in computing any alternative minimum tax for the year of the sale.  The portion of a taxpayer’s alternative minimum tax attributable to certain items of tax preference (including the spread upon the exercise of an ISO) can be credited against the taxpayer’s regular liability in later years subject to certain limitations.

 

Withholding Taxes

 

Exercise of an NSO produces taxable income which is subject to withholding.  The Company will not deliver shares to the optionee unless the optionee has agreed to satisfactory arrangements for meeting all applicable U.S. federal, state and local withholding tax requirements.

 

U.S. federal tax law does not require unrecognized gain on exercise of an ISO to be treated as “wages” for the purposes of FICA taxes.

 

F-3



 

Early Exercise

 

If an optionee is permitted to exercise an option before the optionee’s rights in the shares subject to the option are vested, the tax aspects of such an “early exercise” will be as follows:

 

Incentive Stock Options

 

When an ISO is exercised, the spread is a “preference” item in the year of exercise, which is taken into account in computing an optionee’s alternative minimum tax.  One technique which might enable an optionee to minimize the amount recognized as alternative minimum tax income is to exercise the option at or near the date of grant when the spread is nonexistent or small.  If the option is not vested, the optionee would also make an election under Section 83(b) of the Code (“Section 83(b) Election”) within thirty (30) days after the date of exercise.  In this way the optionee will pay alternative minimum tax based on the spread on the date of exercise instead of the spread on the date the shares vest.  The exercise of the option also begins the one-year holding requirement under Section 422 of the Code that applies after the exercise of an ISO.

 

However, according to U.S. Treasury Regulations issued in August, 2004, an 83(b) Election will not be effective for purposes of measuring the amount of ordinary income in the event of a disqualifying disposition of the ISO Shares, and ordinary income will be recognized in an amount equal to the spread on the date the shares vest, instead of the spread on the date the ISO is exercised.  For this reason, an optionee is urged to consult with a tax advisor before electing to exercise an ISO for unvested shares.

 

Nonstatutory Stock Options

 

If the option is not an ISO but instead is an NSO, exercise prior to vesting and timely filing of a Section 83(b) Election will accomplish two things (1) it will start the capital gains holding period running, and (2) it will prevent the optionee from being taxed (at ordinary income tax rates) upon vesting, if, at that time, the fair market value of the stock has increased from the date of grant.  Of course, when the shares are sold, the gain will be taxed according to how long the shares have been held.

 

Forfeiture of Unvested Shares

 

If service with the Company terminates before the shares are vested, the Company may repurchase the shares at the original purchase price of the shares.  If you had made a Section 83(b) Election, you will not be entitled to deduct as a loss any income recognized on exercise of the option if the fair market value of the stock had exceeded the exercise price at that time.

 

THIS TAX SUMMARY IS GENERAL IN NATURE AND SHOULD NOT BE RELIED UPON BY ANY PERSON IN DECIDING WHETHER OR WHEN TO EXERCISE AN OPTION OR TO MAKE AN ELECTION UNDER SECTION 83(b) OF THE CODE.

 

F-4



 

EACH PERSON SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THESE MATTERS.

 

F-5



EX-10.9 9 filename9.htm

Exhibit 10.9

 

LOCUS DEVELOPMENT, INC.

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is entered into as of July 30, 2010 (the “Effective Date”) by and between Locus Development, Inc. (the “Company”), and Sean E. George (“Executive”).

 

1.                                      Duties and Scope of Employment.

 

(a)                                 Positions and Duties. The Company will continue to employ Executive as President and Chief Executive Officer. The Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Company’s Board of Directors (the “Board”). The period of Executive’s employment under this Agreement is referred to herein as the “Employment Term.

 

(b)                                 Obligations. During the Employment Term, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board.

 

2.                                      At-Will Employment. The parties agree that Executive’s employment with the Company will be “at-will” employment and may be terminated at any time with or without cause or notice. Executive understands and agrees that neither his job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of his employment with the Company. However, as described in this Agreement, Executive may be entitled to severance benefits depending on the circumstances of Executive’s termination of employment with the Company.

 

3.                                      Compensation.

 

(a)                                 Base Salary. During the Employment Term, the Company will pay Executive an annual salary of [$120,000] as compensation for Executive’s services (the “Base Salary”). The Base Salary will be paid periodically in accordance with the Company’s normal payroll practices and be subject to the usual, required withholdings. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

 

(b)                                 Restricted Stock Grant. Executive has been granted the right to purchase 1,000,000 shares of Company common stock subject to a stock restriction agreement entered into by and between the Company and Executive, dated July 15, 2010 (the “Restricted Stock Agreement”).

 

4.                                      Employee Benefits. If and when the Company adopts employee benefit programs, the Executive shall be allowed to participate in Company’s such programs offered to similarly

 



 

situated employees. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

5.                                      Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

 

6.                                      Acceleration upon Change of Control. Upon a Change of Control, 100% of the unvested shares subject to Executive’s then outstanding Company equity compensation awards shall immediately vest, and with respect to options or stock appreciation rights, become exercisable. In all other respects, the Executive’s Company equity compensation awards shall continue to be bound by and subject to the terms of their respective agreements.

 

7.                                      Severance.

 

(a)                                 Termination for other than Cause, Death or Disability Apart from a Change of Control. If prior to a Change of Control or after twelve (12) months following a Change of Control, the Company (or any parent or subsidiary or successor of the Company) terminates Executive’s employment with the Company other than for Cause, death or Disability, then, subject to Section 8, Executive will be entitled to: (i) a lump sum cash payment equal to twelve (12) months of Executive’s then-existing Base Salary, (ii) accelerated vesting of unvested shares subject to Executive’s then outstanding Company equity awards in an amount equal to the number of shares that would have vested had Executive remained employed for an additional twelve (12) months from the date of such termination, and (iii) if Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or comparable state law for Executive and Executive’s eligible dependents (as applicable), within the time period prescribed pursuant to COBRA or such comparable state law, the Company will reimburse Executive for the applicable premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of twelve (12) months from the last date of employment of the Executive with the Company, or (B) the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans or are otherwise ineligible for coverage under COBRA or such comparable state law.

 

(b)                                 Termination for other than Cause, Death or Disability or Resignation by Executive for Good Reason upon or within Twelve Months Following a Change of Control. If upon or within twelve (12) months following a Change of Control (i) the Company (or any parent or subsidiary or successor of the Company) terminates Executive’s employment with the Company other than for Cause, death or Disability, or (ii) the Executive resigns from such employment for Good Reason, then, subject to Section 8, Executive will be entitled to: (A) a lump sum cash payment equal to twelve (12) months of Executive’s then-existing Base Salary and (B) if Executive elects continuation coverage pursuant to the COBRA or comparable state law for Executive and Executive’s eligible dependents (as applicable), within the time period prescribed pursuant to COBRA or such comparable state law, the Company will reimburse Executive for the applicable premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (1) a period of twelve (12) months from the last date of employment of the Executive with the Company, or (2) the date upon which Executive and/or Executive’s

 

2



 

eligible dependents becomes covered under similar plans or are otherwise ineligible for coverage under COBRA or such comparable state law.

 

(c)                                  Termination for Cause, Death or Disability; Resignation without Good Reason. If Executive’s employment with the Company (or any parent or subsidiary or successor of the Company) terminates voluntarily by Executive (except upon resignation for Good Reason upon or within twelve (12) months following a Change of Control), for Cause by the Company or due to Executive’s death or Disability, then (i) all vesting will terminate immediately with respect to Executive’s outstanding equity awards, (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned), and (iii) Executive will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.

 

(d)                                 Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary or successor of the Company), the provisions of this Section 7 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no severance or other benefits upon termination of employment with respect to acceleration of award vesting or severance pay other than those benefits expressly set forth in this Section 7.

 

8.                                      Conditions to Receipt of Severance; No Duty to Mitigate.

 

(a)                                 Separation Agreement and Release of Claims. The receipt of any severance pursuant to Section 7(a) or (b) will be subject to Executive signing and not revoking a separation agreement and release of claims in a form reasonably satisfactory to the Company (the “Release”) and provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the “Release Deadline”). If the Release does not become effective and irrevocable by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the Release becomes effective and irrevocable.

 

(b)                                 Section 409A.

 

(i)                             Notwithstanding anything to the contrary in this Agreement, no Deferred Payments will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

 

(ii)                          Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executive’s separation from service, or, if later, such time as required by Section 8(b)(iii). Except as required by Section 8(b)(iii), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s separation from service but for the preceding sentence will be paid to Executive on the

 

3



 

sixtieth (60th) day following Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.

 

(iii)                               Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

 

(iv)                              Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of clause (i) above.

 

(v)                                 Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of clause (i) above.

 

(vi)                              The foregoing provisions and all compensation and benefits provided for under this Agreement are intended to comply with or be exempt from the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

 

(c)                                  Confidential Information Agreement. Executive’s receipt of any payments or benefits under Section 7 will be subject to Executive continuing to comply with the terms of Confidential Information Agreement (as defined in Section 10).

 

(d)                                 No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

 

9.                                      Definitions.

 

(a)                                 Cause. For purposes of this Agreement, “Cause” is defined as (i) an act of dishonesty made by Executive in connection with Executive’s responsibilities as an employee,

 

4



 

(ii) Executive’s conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude, (iii) Executive’s gross misconduct, (iv) Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Executive owes an obligation of nondisclosure as a result of Executive’s relationship with the Company; (v) Executive’s willful breach of any obligations under any written agreement or covenant with the Company; or (vi) Executive’s continued failure to perform his employment duties after Executive has received a written demand of performance from the Company which specifically sets forth the factual basis for the Company’s belief that Executive has not substantially performed his duties and has failed to cure such non-performance to the Company’s satisfaction within 15 business days after receiving such notice.

 

(b)                                 Change of Control. For purposes of this Agreement, “Change of Control” of the Company is defined as (a) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation or stock transfer, but excluding any such transaction effected primarily for the purpose of changing the domicile of the Company), unless the Company’s stockholders of record immediately prior to such transaction or series of related transactions hold, immediately after such transaction or series of related transactions, at least 50% of the voting power of the surviving or acquiring entity (provided that the sale by the Company of its securities for the purposes of raising additional funds shall not constitute a Change of Control hereunder); or (b) a sale of all or substantially all of the assets of the Company. Notwithstanding the foregoing provisions of this definition, a transaction will not be deemed a Change of Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A.

 

(c)                                  Code. For purposes of this Agreement, “Code” means the Internal Revenue Code of 1986, as amended.

 

(d)                                 Deferred Payment. For the purposes of this Agreement, “Deferred Payment” means any severance pay or benefits to be paid or provided to Executive (or Executive’s estate or beneficiaries) pursuant to this Agreement and any other severance payments or separation benefits, that in each case, when considered together, are considered deferred compensation under Section 409A.

 

(e)                                  Disability. For purposes of this Agreement, “Disability” means, in the good faith judgment of the Board, Executive being unable to substantially perform Executive’s duties under this Agreement for not less than 120 work days within a twelve (12) consecutive month period as a result of Executive’s incapacity due to any medically determinable physical or mental impairment.

 

(f)                                   Good Reason. For the purposes of this Agreement, “Good Reason” means Executive’s resignation within thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Executive’s express written consent: (i) a material reduction of Executive’s duties, position or responsibilities, or the removal of Executive from such position and responsibilities, either of which results in a material diminution of Executive’s authority, duties or responsibilities, unless Executive is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); provided, however, that a reduction in duties, position or responsibilities

 

5



 

solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such following a Change of Control but is not made the Chief Executive Officer of the acquiring corporation) will not constitute “Good Reason”; (ii) a material reduction in Executive’s Base Salary; provided, however, that a reduction in Executive’s Base Salary of ten percent (10%) or less in any one year will not be deemed a material reduction; or (iii) a material change in the geographic location of Executive’s primary work facility or location; provided, that a relocation of less than thirty (30) miles from Executive’s then present location will not be considered a material change in geographic location. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and a reasonable cure period of not less than thirty (30) days following the date the Company receives such notice during which such condition must not have been cured.

 

(g)                                  Section 409A. For purposes of this Agreement, “Section 409A” means Section 409A of the Code and any final regulations and guidance thereunder and any applicable state law equivalent, as each may be amended or promulgated from time to time

 

(h)                                 Section 409A Limit. For purposes of this Agreement, “Section 409A Limit” will mean two (2) times the lesser of: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of his or her separation from service as determined under Treasury Regulation Section 1.409A-l(b)(9)(iii)(A)(l) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 40l(a)(17) of the Internal Revenue Code for the year in which Executive’s separation from service occurred.

 

10.                               Confidential Information. Executive agrees to enter into the Company’s standard Confidential Information and Invention Assignment Agreement (the “Confidential Information Agreement”) upon the Effective Date.

 

11.                               Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to solicit, recruit, or encourage any employee of the Company (or any parent or subsidiary of the Company) to leave his or her employment either for Executive or for any other entity or person. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his or her obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants.

 

12.                               Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution.

 

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Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.

 

13.                               Excise Tax. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Executive’s benefits under this Agreement shall be either

 

(1)                                 delivered in full, or

 

(2)                                 delivered as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax,

 

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Any reduction in payments and/or benefits required by this Section 13 will occur in the following order: (1) reduction of cash payments; (2) reduction of vesting acceleration of equity awards; and (3) reduction of other benefits paid or provided to Executive. In the event that acceleration of vesting of equity awards is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant for Executive’s equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. In no event will Executive exercise any discretion with respect to the ordering of any reductions of payments or benefits under this Section 13.

 

14.                               Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

 

If to the Company:

 

Locus Development, Inc.

2006 Monroe Ave.

Belmont, CA 94002

Attn: chief financial officer at the time

 

If to Executive:

 

at the last residential address known by the Company.

 

7



 

15.                               Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

 

16.                               Arbitration.

 

(a)                                 Arbitration. In consideration of Executive’s employment with the Company, its promise to arbitrate all employment-related disputes, and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s employment with the Company or termination thereof, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Act”), and pursuant to California law. The Federal Arbitration Act shall also apply with full force and effect, notwithstanding the application of procedural rules set forth under the Act.

 

(b)                                 Dispute Resolution. Disputes that Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under local, state, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California Family Rights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

 

(c)                                  Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing. The arbitrator shall have the power to award any remedies available under applicable law, and the arbitrator shall award attorneys’ fees and costs to the prevailing party, except as prohibited by law. The Executive understands that the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that the Executive shall pay the first $125.00 of any filing fees associated with any arbitration that Executive initiates. Executive agrees that the arbitrator shall administer and conduct any arbitration in accordance with California law, including the California Code of Civil Procedure and the California Evidence Code, and that the arbitrator shall apply substantive and procedural California law to any dispute or claim, without reference to the rules of conflict of law. To the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with California law, California law shall take precedence. The decision of the arbitrator shall be in writing.

 

8



 

(d)                                 Remedy. Except as provided by the Act and this Agreement, arbitration shall be the sole, exclusive, and final remedy for any dispute between Executive and the Company. Accordingly, except as provided by the Act and this Agreement, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

 

(e)                                  Availability of Injunctive Relief. In addition to the right under the Act to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys fees.

 

(f)                                   Administrative Relief. Executive is not prohibited from pursuing an administrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, including, but not limited to, the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers’ Compensation Board. However, Executive may not pursue court action regarding any such claim, except as permitted by law.

 

(g)                                  Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understands it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

 

17.                               Integration. This Agreement, together with the Restricted Stock Agreement and the Confidential Information Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. With respect to stock options granted on or after the date of this Agreement, the acceleration of vesting provisions provided herein will apply to such stock options except to the extent otherwise explicitly provided in the applicable stock option agreement. This Agreement may be modified only by agreement of the parties by a written instrument executed by the parties that is designated as an amendment to this Agreement.

 

18.                               Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.

 

19.                               Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

 

9



 

20.                               Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

 

21.                               Governing Law. This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

 

22.                               Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

 

23.                               Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

 

10



 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written.

 

LOCUS DEVELOPMENT, INC.:

 

 

 

 

 

 

 

 

By:

/s/ Sean E. George

 

Date:

7/30/10

 

 

 

Title:

CEO

 

 

 

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

 

 

 

/s/ Sean E. George

 

Date:

7/30/10

 

[SIGNATURE PAGE TO EXECUTIVE EMPLOYMENT AGREEMENT]

 

11



EX-10.10 10 filename10.htm

Exhibit 10.10

 

LOCUS DEVELOPMENT, INC.

 

AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT

 

This Amendment No. 1 to Executive Employment Agreement (this “Amendment”) is entered into as of September 2, 2010, by and between Locus Development, Inc., a Delaware corporation (the “Company”), and Sean E. George (“Executive”)

 

WHEREAS, the Company and Executive have previously entered into an Executive Employment Agreement, dated as of July 30, 2010 (the “Agreement”); and

 

WHEREAS, as a condition of the closing of the sale of the Company’s Series A Preferred Stock, the Company and Executive have agreed to amend the Agreement in accordance Section 17 thereof.

 

NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 

1.                                      Severance.

 

(a)                                 Termination for other than Cause, Death or Disability Apart from a Change of Control. Section 7(a)(i) is hereby deleted and replaced in its entirety with the following language.

 

“(i) cash payment equal to twelve (12) months of Executive’s then-existing Base Salary, payable in equal monthly installments,”

 

(b)                                 Termination for other than Cause, Death or Disability or Resignation by Executive for Good Reason upon or within Twelve Months Following a Change of Control. Section 7(b)(ii)(A) is hereby deleted and replaced in its entirety with the following language.

 

“(A) cash payment equal to twelve (12) months of Executive’s then-existing Base Salary, payable in equal monthly installments,”

 

2.                                      Conditions to Receipt of Severance; No Duty to Mitigate. Section 8(d) is hereby deleted and replaced in its entirety with the following language.

 

“(d)                           No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement; provided however, that, any earnings that Executive may receive from any other source shall reduce any such payment on a dollar for dollar basis.”

 



 

3.                                      Definitions.

 

(a)                                 Section 9(a) is hereby deleted and replaced in its entirety with the following language.

 

“(a)                           Cause. For purposes of this Agreement, “Cause” is defined as (i) an act of dishonesty made by Executive in connection with Executive’s responsibilities as an employee, (ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he were retained in his position, (iii) Executive’s gross misconduct, (iv) Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Executive owes an obligation of nondisclosure as a result of Executive’s relationship with the Company; (v) Executive’s breach of any obligations under any written agreement or covenant with the Company; (vi) continued non-performance by the Executive of his duties hereunder which has continued for more than 30 days following written notice of such non-performance from the Board, or (vii) failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.”

 

(b)                                 Section 9(e) is hereby deleted and replaced in its entirety with the following language.

 

“(e)                            Disability. For purposes of this Agreement, “Disability” means, in the good faith judgment of the Board, Executive being unable to substantially perform Executive’s duties under this Agreement for not less than 120 work days, whether or not consecutive, within a twelve (12) consecutive month period as a result of Executive’s incapacity due to any medically determinable physical or mental impairment.”

 

4.                                      Limited Effect. Except as expressly amended and modified by this Amendment, the Agreement shall continue to be, and shall remain, in full force and effect in accordance with their terms.

 

5.                                      Governing Law. This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

 

2



 

6.                                      Acknowledgment. Executive acknowledges that she has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Amendment, and is knowingly and voluntarily entering into this Amendment.

 

7.                                      Counterparts. This Amendment may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

 

[The remainder of this page is intentionally left blank.]

 

3



 

IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company by their duly authorized officers, as of the day and year first above written.

 

 

LOCUS DEVELOPMENT, INC.:

 

 

 

By:

Sean E. George

 

 

 

 

Title:

President

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

/s/ Sean E. George

 

 

 

Sean E. George

 

 

SIGNATURE PAGE TO AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT

 



EX-10.11 11 filename11.htm

Exhibit 10.11

 

LOCUS DEVELOPMENT, INC.

 

RESTRICTED STOCK PURCHASE AGREEMENT

 

This Restricted Stock Purchase Agreement (the “Agreement”) is made as of July 15, 2010 by and between Locus Development, Inc., a Delaware corporation (the “Company”), and Sean E. George (the “Purchaser”).

 

In consideration of the mutual covenants and representations set forth below, the Company and the Purchaser agree as follows:

 

1.                                      Purchase and Sale of the Shares. Subject to the terms and conditions of this Agreement, the Company agrees to sell to the Purchaser and the Purchaser agrees to purchase from the Company on the Closing (as defined below) 1,000,000 shares of the Company’s Common Stock, par value $0.0001 per share (the “Shares”), at a price of $0.0001 per share (the “Purchase Price”), for an aggregate purchase price of $100.00.

 

2.                                      Closing. The purchase and sale of the Shares shall occur at a closing (the “Closing”) to be held on the date first set forth above, or at any other time mutually agreed upon by the Company and the Purchaser. The Closing will take place at the principal office of the Company or at such other place as shall be designated by the Company. At the Closing, the Purchaser shall deliver the aggregate Purchase Price set forth above to the Company by wire transfer, check or any other method of payment permissible under applicable law and approved by the Company’s board of directors (or any combination of such methods of payment), and the Company will issue, as promptly thereafter as practicable, a stock certificate, registered in the name of the Purchaser, reflecting the Shares.

 

3.                                      Repurchase Option.

 

A.                                    Option. In the event the Purchaser ceases to be an employee, consultant, advisor, officer or director of the Company (a “Service Provider”) for any or no reason, including, without limitation, by reason of the Purchaser’s death or disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), “Disability”), resignation or involuntary termination, the Company shall, from such time (as determined by the Company in its discretion), have the right, but not the obligation (the “Repurchase Option”), for a period of 90 days from the date the Purchaser ceases to be a Service Provider, to repurchase any Shares which have not yet been released from the Repurchase Option (the “Unreleased Shares”) at a price per share equal to the lesser of (x) the fair market value of the shares at the time the Repurchase Option is exercised, as determined by the Company’s board of directors and (y) the Purchase Price (the “Repurchase Price”). The Repurchase Option shall be exercised by the Company by delivering written notice to the Purchaser or, in the event of the Purchaser’s death, the Purchaser’s executor and, at the Company’s option, (i) by delivering to the Purchaser or the Purchaser’s executor a check in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount of the Purchaser’s indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) such that the combined payment and cancellation of indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and beneficial owner of the Unreleased Shares being repurchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Unreleased Shares being repurchased by the Company.

 



 

B.                                    Assignability. The Company in its sole discretion may assign all or part of the Repurchase Option to one or more employees, officers, directors or stockholders of the Company or other persons or organizations.

 

4.                                      Release of Shares from Repurchase Option; Vesting.

 

A.                                    Vesting. So long as the Purchaser’s continuous status as a Service Provider has not yet terminated in each such instance, (i) twenty five percent (25%) of the total number of Shares shall be released from the Repurchase Option on the one-year anniversary of January 14, 2010, and (ii) thereafter, the remaining seventy five percent (75%) of the total number of Shares shall be released from the Repurchase Option in equal monthly installments over the next thirty six (36) months on the corresponding day of each relevant month.

 

B.                                    Acceleration upon a Change of Control. In the event of a Change of Control (as defined below), 100% of the total number of Shares that have not been released from the Repurchase Option shall be immediately released from the Repurchase Option, provided that the Purchaser’s continuous status as a Service Provider has not been terminated prior to such time.

 

C.                                    “Change of Control” Definition. For purposes of this Agreement, a “Change of Control” means either:

 

(1)                                 the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation or stock transfer, but excluding any such transaction effected primarily for the purpose of changing the domicile of the Company), unless the Company’s stockholders of record immediately prior to such transaction or series of related transactions hold, immediately after such transaction or series of related transactions, at least 50% of the voting power of the surviving or acquiring entity (provided that the sale by the Company of its securities for the purposes of raising additional funds shall not constitute a Change of Control hereunder); or

 

(2)                                 a sale of all or substantially all of the assets of the Company.

 

D.                                    Delivery of Released Shares. Subject to the provisions of Section 8, the Shares which have been released from the Company’s Repurchase Option shall be delivered to the Purchaser at the Purchaser’s request.

 

5.                                      Limitation on Payments.

 

A.                                    Payments Limitation. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Purchaser (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Purchaser’s benefits under this Agreement shall be either

 

(1)                                 delivered in full, or

 

(2)                                 delivered as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax,

 

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Purchaser on an after-tax basis, of the greatest

 

2



 

amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Any reduction in payments and/or benefits required by this Section 5 will occur in the following order: (1) reduction of cash payments; (2) reduction of vesting acceleration of equity awards; and (3) reduction of other benefits paid or provided to Purchaser. In the event that acceleration of vesting of equity awards is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant for Purchaser’s equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. In no event will Purchaser exercise any discretion with respect to the ordering of any reductions of payments or benefits under this Section 5.

 

B.                                    Determination. Unless the Company and the Purchaser otherwise agree in writing, any determination required under this Section 5 shall be made in writing by the Company’s independent public accountants or a national “Big Four” accounting firm selected by the Company (the “Accountants”), whose determination shall be conclusive and binding upon the Purchaser and the Company for all purposes. For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code. The Company and the Purchaser shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 5.

 

6.                                      Restrictions on Transfer.

 

A.                                    Investment Representations and Legend Requirements. The Purchaser hereby makes the investment representations listed on Exhibit A to the Company as of the date of this Agreement and as of the date of the Closing, and agrees that such representations are incorporated into this Agreement by this reference, such that the Company may rely on them in issuing the Shares. The Purchaser understands and agrees that the Company shall cause the legends set forth below, or substantially equivalent legends, to be placed upon any certificate(s) evidencing ownership of the Shares, together with any other legends that may be required by the Company or by applicable state or federal 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, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, A LOCK-UP PERIOD IN THE EVENT OF A PUBLIC OFFERING AND A REPURCHASE OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL, LOCK-UP

 

3



 

PERIOD AND REPURCHASE OPTION ARE BINDING ON TRANSFEREES OF THESE SHARES.

 

B.                                    Stop-Transfer Notices. The Purchaser agrees that to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

C.                                    Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

 

D.                                    Lock-Up Period. The Purchaser hereby agrees that the Purchaser shall not sell, offer, pledge, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, grant any right or warrant to purchase, lend or otherwise transfer or encumber, directly or indirectly, any Shares or other securities of the Company, nor shall the Purchaser enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Shares or other securities of the Company, during the period from the filing of the first registration statement of the Company filed under the Securities Act of 1933, as amended (the “Securities Act”), that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act through the end of the 180-day period following the effective date of such registration statement (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto). The obligations described in this section shall not apply to a registration relating solely to employee benefit plans on Form S-l or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Purchaser further agrees, if so requested by the Company or any representative of its underwriters, to enter into such underwriter’s standard form of “lockup” or “market standoff agreement in a form satisfactory to the Company and such underwriter. In the event that the Purchaser refuses to execute any such agreement, the Purchaser hereby agrees to comply with all of the transfer restrictions set forth above in this section for an additional 30 days beyond each 180-day (or other) period otherwise called for above. The Purchaser agrees that the Company may assign any or all of its rights under this section to the managing underwriter for any registered offering described in this section, and that such managing underwriter shall be able to further assign such rights in its sole discretion, in each case without any notice to or consent from the Purchaser being required. The Purchaser further agrees that any assignee of the Company’s rights under this section shall not be subject to any obligation of the Company set forth in this Agreement. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of any such restriction period.

 

E.                                     Unreleased Shares. No Unreleased Shares subject to the Repurchase Option contained in Section 3 of this Agreement, nor any beneficial interest in such Shares, shall be sold, transferred, encumbered or otherwise disposed of in any way (whether by operation of law or otherwise) by the Purchaser, other than as expressly permitted or required by Section 3.

 

F.                                      Released Shares. No Shares purchased pursuant to this Agreement, nor any beneficial interest in such Shares, shall be sold, transferred, encumbered or otherwise disposed of in any way (whether by operation of law or otherwise) by the Purchaser or any subsequent transferee, other than

 

4



 

in compliance with the Company’s right of first refusal provisions contained in Section 7 of this Agreement.

 

7.                                      Company’s Right of First Refusal. Before any Shares acquired by the Purchaser pursuant to this Agreement (or any beneficial interest in such Shares) may be sold, transferred, encumbered or otherwise disposed of in any way (whether by operation of law or otherwise) by the Purchaser or any subsequent transferee (each a “Holder”), such Holder must first offer such Shares or beneficial interest to the Company and/or its assignee(s) as follows:

 

A.                                    Notice of Proposed Transfer. The Holder shall deliver to the Company a written notice stating: (i) the Holder’s bona fide intention to sell or otherwise transfer the Shares; (ii) the name of each proposed transferee; (iii) the number of Shares to be transferred to each proposed transferee; (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares; and (v) that by delivering the notice, the Holder offers all such Shares to the Company and/or its assignee(s) pursuant to this section and on the same terms described in the notice.

 

B.                                    Exercise of Right of First Refusal. At any time within 30 days after receipt of the Holder’s notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the proposed transferees, at the purchase price determined in accordance with Section 7.C.

 

C.                                    Purchase Price. The purchase price for the Shares purchased by the Company and/or its assignee(s) under this section shall be the price listed in the Holder’s notice. If the price listed in the Holder’s notice includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the board of directors of the Company in its sole discretion.

 

D.                                    Payment. Payment of the purchase price shall be made, at the option of the Company and/or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company and/or its assignee(s), or by any combination thereof within 30 days after receipt by the Company of the Holder’s notice (or at such later date as is called for by such notice).

 

E.                                     Holder’s Right to Transfer. If all of the Shares proposed in the notice to be transferred to a given proposed transferee are not purchased by the Company and/or its assignee(s) as provided in this section, then the Holder may sell or otherwise transfer such Shares to that proposed transferee; provided that: (i) the transfer is made only on the terms provided for in the notice, with the exception of the purchase price, which may be either the price listed in the notice or any higher price; (ii) such transfer is consummated within 60 days after the date the notice is delivered to the Company; (iii) the transfer is effected in accordance with any applicable securities laws, and if requested by the Company, the Holder shall have delivered an opinion of counsel acceptable to the Company to that effect; and (iv) the proposed transferee agrees in writing to receive and hold the Shares so transferred subject to all of the provisions of this Agreement, including but not limited to this section, and there shall be no further transfer of such Shares except in accordance with the terms of this section. If any Shares described in a notice are not transferred to the proposed transferee within the period provided above, then before any such Shares may be transferred, a new notice shall be given to the Company, and the Company and/or its assignees shall again be offered the right of first refusal described in this section.

 

F.                                      Involuntary Transfers. Subject to the other provisions of this Section 7, in the event, at any time after the date of this Agreement, of any transfer by operation of law or other involuntary transfer of all or a portion of the Shares by the record holder thereof that does not occur in accordance with the other provisions of this Section 7, the Company shall have the right to purchase all of

 

5



 

the Shares transferred at the greater of the purchase price paid by Purchaser pursuant to this Agreement or the fair market value of the Shares on the date of transfer (as determined by the board of directors of the Company). Upon such a transfer, the persons transferring or acquiring the Shares shall promptly notify the Secretary of the Company in writing of such transfer. The right to purchase such Shares shall be provided to the Company for a period of 30 days following receipt by the Company of written notice of the transfer.

 

G.                                    Exception for Certain Family Transfers. Notwithstanding anything to the contrary contained elsewhere in this section, the transfer of any or all of the Shares during the Holder’s lifetime (except in connection with a divorce, dissolution, legal separation or annulment), or on the Holder’s death by will or intestacy, to the Holder’s spouse, child, father, mother, brother, sister, father-in-law, mother-in-law, brother-in-law, sister-in-law, grandfather, grandmother, grandchild, cousin, aunt, uncle, niece, nephew, stepchild, or to a trust or other similar estate planning vehicle for the benefit of the Holder or any such person, shall be exempt from the provisions of this section; provided that, in each such case, the transferee agrees in writing to receive and hold the Shares so transferred subject to all of the provisions of this Agreement, including but not limited to this section, and there shall be no further transfer of such Shares except in accordance with the terms of this section; and provided further, that without the prior written consent of the Company, which may be withheld in the sole discretion of the Company, no more than three transfers may be made pursuant to this section, including all transfers by the Holder and all transfers by any transferee.

 

H.                                   Termination of Right of First Refusal. The rights contained in this section shall terminate as to all Shares purchased hereunder upon the earlier of: (i) the closing date of the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act, and (ii) the closing date of a Change of Control pursuant to which the holders of the outstanding voting securities of the Company receive securities of a class registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

 

8.                                      Escrow.

 

A.                                    Deposit. As security for the faithful performance of this Agreement, the Purchaser agrees, immediately upon receipt of the certificate(s) evidencing the Shares, to deliver such certificate(s), together with a stock power in the form of Exhibit B attached to this Agreement, executed by the Purchaser and by the Purchaser’s spouse, if any (with the date and number of Shares left blank), to the Secretary of the Company or to another designee of the Company (the “Escrow Agent”). These documents shall be held by the Escrow Agent pursuant to the Joint Escrow Instructions of the Company and the Purchaser set forth in Exhibit C attached to this Agreement, which instructions are incorporated into this Agreement by this reference, and which instructions shall also be delivered to the Escrow Agent after the Closing.

 

B.                                    Rights in Escrow Shares. Subject to the terms hereof, the Purchaser shall have all the rights of a stockholder with respect to such Shares while they are held in escrow, including without limitation, the right to vote the Shares. If, from time to time during the term of the Company’s Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, (ii) any dividend of cash or other property on the Shares, or (iii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities or cash or other consideration to which the Purchaser is entitled by reason of the Purchaser’s ownership of the Shares shall immediately become subject to this escrow, deposited with the Escrow Agent and included thereafter as “Shares” for purposes of this Agreement and the Company’s Repurchase Option.

 

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9.                                      Tax Consequences. The Purchaser has reviewed with the Purchaser’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Purchaser understands that the Purchaser (and not the Company) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by this Agreement. The Purchaser understands that Section 83 of the Code, taxes as ordinary income the difference between the purchase price for the Shares and the fair market value of the Shares as of the date any restrictions on the Shares lapse. In this context, “restriction” includes the right of the Company to buy back the Shares pursuant to the Repurchase Option. The Purchaser understands that the Purchaser may elect to be taxed at the time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code with the IRS within 30 days from the date of purchase. THE FORM FOR MAKING THIS SECTION 83(B) ELECTION IS ATTACHED TO THIS AGREEMENT AS EXHIBIT D AND THE PURCHASER (AND NOT THE COMPANY OR ANY OF ITS AGENTS) SHALL BE SOLELY RESPONSIBLE FOR APPROPRIATELY FILING SUCH FORM, EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS AGENTS TO MAKE THIS FILING ON THE PURCHASER’S BEHALF.

 

10.                               General Provisions.

 

A.                                    Choice of Law. This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of California.

 

B.                                    Integration. This Agreement, including all exhibits hereto, represents the entire agreement between the parties with respect to the purchase of the Shares by the Purchaser and supersedes and replaces any and all prior written or oral agreements regarding the subject matter of this Agreement including, but not limited to, any representations made during any interviews, relocation discussions or negotiations whether written or oral.

 

C.                                    Notices. Any notice, demand, offer, request or other communication required or permitted to be given by either the Company or the Purchaser pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service or (v) four days after being deposited in the U.S. mail, First Class with postage prepaid and return receipt requested, and addressed to the parties at the addresses provided to the Company (which the Company agrees to disclose to the other parties upon request) or such other address as a party may request by notifying the other in writing.

 

D.                                    Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this section or which becomes bound by the terms of this Agreement by operation of law. Subject to the restrictions on transfer set forth in this Agreement, this Agreement shall be binding upon the Purchaser and his or her heirs, executors, administrators, successors and assigns.

 

E.                                     Assignment; Transfers. Except as set forth in this Agreement, this Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or

 

7



 

sublicensed by the Purchaser without the prior written consent of the Company. Any attempt by the Purchaser without such consent to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Except as set forth in this Agreement, any transfers in violation of any restriction upon transfer contained in any section of this Agreement shall be void, unless such restriction is waived in accordance with the terms of this Agreement.

 

F.                                      Waiver. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are cumulative and shall not constitute a waiver of either party’s right to assert any other legal remedy available to it.

 

G.                                    Purchaser Investment Representations and Further Documents. The Purchaser agrees upon request to execute any further documents or instruments necessary or reasonably desirable in the view of the Company to carry out the purposes or intent of this Agreement, including (but not limited to) the applicable exhibits and attachments to this Agreement.

 

H.                                   Severability. Should any provision of this Agreement be found to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable to the greatest extent permitted by law.

 

I.                                        Rights as Stockholder. Subject to the terms and conditions of this Agreement, the Purchaser shall have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that the Purchaser delivers a fully executed copy of this Agreement (including the applicable exhibits and attachments to this Agreement) and full payment for the Shares to the Company, and until such time as the Purchaser disposes of the Shares in accordance with this Agreement. Upon such transfer, the Purchaser shall have no further rights as a holder of the Shares so purchased except (in the case of a transfer to the Company) the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and the Purchaser shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation.

 

J.                                        Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made after the date of this Agreement.

 

K.                                   Employment at Will. THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THIS AGREEMENT IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE PROVIDER AT WILL (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). THE PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, OR FOR ANY PERIOD AT ALL, AND SHALL NOT INTERFERE WITH THE PURCHASER’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE PURCHASER’S RELATIONSHIP WITH THE COMPANY AT ANY TIME, WITH OR WITHOUT CAUSE OR NOTICE.

 

L.                                     Arbitration and Equitable Relief.

 

(1)                                 Arbitration. IN CONSIDERATION OF THE PROMISES IN THIS AGREEMENT, THE PURCHASER AGREES THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER,

 

8


 

DIRECTOR, SHAREHOLDER OR BENEFIT PLAN OF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE) ARISING OUT OF, RELATING TO, OR RESULTING FROM THIS AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION UNDER THE ARBITRATION RULES SET FORTH IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 THROUGH 1294.2, INCLUDING SECTION 1283.05 (THE “RULES”) AND PURSUANT TO CALIFORNIA LAW. DISPUTES WHICH THE PURCHASER AGREES TO ARBITRATE, AND THEREBY AGREES TO WAIVE ANY RIGHT TO A TRIAL BY JURY, INCLUDE ANY STATUTORY CLAIMS UNDER STATE OR FEDERAL LAW, INCLUDING, BUT NOT LIMITED TO, CLAIMS UNDER TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE OLDER WORKERS BENEFIT PROTECTION ACT, THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, THE FAMILY AND MEDICAL LEAVE ACT, THE CALIFORNIA FAMILY RIGHTS ACT, THE CALIFORNIA LABOR CODE, CLAIMS OF HARASSMENT, DISCRIMINATION OR WRONGFUL TERMINATION AND ANY STATUTORY CLAIMS. THE PURCHASER FURTHER UNDERSTANDS THAT THIS AGREEMENT TO ARBITRATE ALSO APPLIES TO ANY DISPUTES THAT THE COMPANY MAY HAVE WITH THE PURCHASER.

 

(2)                                 Procedure. THE PURCHASER AGREES THAT ANY ARBITRATION WILL BE ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) AND THAT THE NEUTRAL ARBITRATOR WILL BE SELECTED IN A MANNER CONSISTENT WITH ITS NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES. THE PURCHASER AGREES THAT THE ARBITRATOR SHALL HAVE THE POWER TO DECIDE ANY MOTIONS BROUGHT BY ANY PARTY TO THE ARBITRATION, INCLUDING MOTIONS FOR SUMMARY JUDGMENT AND/OR ADJUDICATION AND MOTIONS TO DISMISS AND DEMURRERS, PRIOR TO ANY ARBITRATION HEARING. THE PURCHASER ALSO AGREES THAT THE ARBITRATOR SHALL HAVE THE POWER TO AWARD ANY REMEDIES, INCLUDING ATTORNEYS’ FEES AND COSTS, AVAILABLE UNDER APPLICABLE LAW. PURCHASER UNDERSTANDS THAT THE COMPANY WILL PAY FOR ANY ADMINISTRATIVE OR HEARING FEES CHARGED BY THE ARBITRATOR OR AAA EXCEPT THAT PURCHASER SHALL PAY THE FIRST $125.00 OF ANY FILING FEES ASSOCIATED WITH ANY ARBITRATION PURCHASER INITIATES. PURCHASER AGREES THAT THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN A MANNER CONSISTENT WITH THE RULES AND THAT TO THE EXTENT THAT THE AAA’S NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES CONFLICT WITH THE RULES, THE RULES SHALL TAKE PRECEDENCE. THE PURCHASER AGREES THAT THE DECISION OF THE ARBITRATOR SHALL BE IN WRITING.

 

(3)                                 Remedy. EXCEPT AS PROVIDED BY THE RULES AND THIS AGREEMENT, ARBITRATION SHALL BE THE SOLE, EXCLUSIVE AND FINAL REMEDY FOR ANY DISPUTE BETWEEN THE PURCHASER AND THE COMPANY. ACCORDINGLY, EXCEPT AS PROVIDED FOR BY THE RULES AND THIS AGREEMENT, NEITHER THE PURCHASER NOR THE COMPANY WILL BE PERMITTED TO PURSUE COURT ACTION REGARDING CLAIMS THAT ARE SUBJECT TO ARBITRATION. NOTWITHSTANDING, THE ARBITRATOR WILL NOT HAVE THE AUTHORITY TO DISREGARD OR REFUSE TO ENFORCE ANY LAWFUL COMPANY POLICY, AND THE ARBITRATOR SHALL NOT ORDER OR REQUIRE THE COMPANY TO ADOPT A POLICY NOT OTHERWISE REQUIRED BY LAW WHICH THE COMPANY HAS NOT ADOPTED.

 

(4)                                 Availability of Injunctive Relief. BOTH PARTIES AGREE THAT ANY PARTY MAY PETITION A COURT FOR INJUNCTIVE RELIEF AS PERMITTED BY THE RULES

 

9



 

INCLUDING, BUT NOT LIMITED TO, WHERE EITHER PARTY ALLEGES OR CLAIMS A VIOLATION OF ANY CONFIDENTIAL INFORMATION OR INVENTION ASSIGNMENT AGREEMENT BETWEEN THE PURCHASER AND THE COMPANY OR ANY OTHER AGREEMENT REGARDING TRADE SECRETS, CONFIDENTIAL INFORMATION, NONSOLICITATION OR LABOR CODE §2870. BOTH PARTIES UNDERSTAND THAT ANY BREACH OR THREATENED BREACH OF SUCH AN AGREEMENT WILL CAUSE IRREPARABLE INJURY AND THAT MONEY DAMAGES WILL NOT PROVIDE AN ADEQUATE REMEDY THEREFOR AND BOTH PARTIES HEREBY CONSENT TO THE ISSUANCE OF AN INJUNCTION. IN THE EVENT EITHER PARTY SEEKS INJUNCTIVE RELIEF, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER REASONABLE COSTS AND ATTORNEYS’ FEES.

 

(5)                                 Administrative Relief. THE PURCHASER UNDERSTANDS THAT THIS AGREEMENT DOES NOT PROHIBIT THE PURCHASER FROM PURSUING AN ADMINISTRATIVE CLAIM WITH A LOCAL, STATE OR FEDERAL ADMINISTRATIVE BODY SUCH AS THE DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING, THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION OR THE WORKERS’ COMPENSATION BOARD. THIS AGREEMENT DOES, HOWEVER, PRECLUDE THE PURCHASER FROM PURSUING COURT ACTION REGARDING ANY SUCH CLAIM.

 

(6)                                 Voluntary Nature of Agreement. THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE PURCHASER IS EXECUTING THIS AGREEMENT VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE BY THE COMPANY OR ANYONE ELSE. THE PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THE PURCHASER HAS CAREFULLY READ THIS AGREEMENT AND THAT THE PURCHASER HAS ASKED ANY QUESTIONS NEEDED FOR THE PURCHASER TO UNDERSTAND THE TERMS, CONSEQUENCES AND BINDING EFFECT OF THIS AGREEMENT AND FULLY UNDERSTANDS IT, INCLUDING THAT THE PURCHASER IS WAIVING THE PURCHASER’S RIGHT TO A JURY TRIAL. FINALLY, THE PURCHASER AGREES THAT THE PURCHASER HAS BEEN PROVIDED AN OPPORTUNITY TO SEEK THE ADVICE OF AN ATTORNEY OF THE PURCHASER’S CHOICE BEFORE SIGNING THIS AGREEMENT.

 

M.                                 Reliance on Counsel and Advisors. The Purchaser acknowledges that Wilson Sonsini Goodrich & Rosati, Professional Corporation, is representing only the Company in this transaction. The Purchaser acknowledges that he or she has had the opportunity to review this Agreement, including all attachments hereto, and the transactions contemplated by this Agreement with his or her own legal counsel, tax advisors and other advisors. The Purchaser is relying solely on his or her own counsel and advisors and not on any statements or representations of the Company or its agents for legal or other advice with respect to this investment or the transactions contemplated by this Agreement.

 

N.                                    Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. Facsimile copies of signed signature pages shall be binding originals.

 

(signature page follows)

 

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The parties represent that they have read this Agreement in its entirety, have had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understand this Agreement. The Purchaser agrees to notify the Company of any change in his or her address below.

 

 

SEAN E. GEORGE

 

LOCUS DEVELOPMENT, INC.

 

 

 

 

 

 

/s/ Sean E. George

 

/s/ Sean E. George

Signature

 

Signature

 

 

 

 

 

 

Sean E. George

 

Sean E. George

Print Name

 

Print Name

 

 

 

 

 

 

 

 

CEO

 

 

Print Title

 

 

 

Address:

 

 

 

 

 

(Personal Address)

 

 

 



 

EXHIBIT A

 

INVESTMENT REPRESENTATION STATEMENT

 

PURCHASER

:

Sean E. George

 

 

 

COMPANY

:

Locus Development, Inc.

 

 

 

SECURITY

:

Common Stock

 

 

 

AMOUNT

:

1,000,000 shares

 

 

 

DATE

:

July 15, 2010

 

In connection with the purchase of the above-listed shares, I, the undersigned purchaser, represent to the Company as follows:

 

1.                                      The Company may rely on these representations. I understand that the Company’s sale of the shares to me has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), because the Company believes, relying in part on my representations in this document, that an exemption from such registration requirement is available for such sale. I understand that the availability of this exemption depends upon the representations I am making to the Company in this document being true and correct.

 

2.                                      I am purchasing for investment. I am purchasing the shares solely for investment purposes, and not for further distribution. My entire legal and beneficial ownership interest in the shares is being purchased and shall be held solely for my account, except to the extent I intend to hold the shares jointly with my spouse. I am not a party to, and do not presently intend to enter into, any contract or other arrangement with any other person or entity involving the resale, transfer, grant of participation with respect to or other distribution of any of the shares. My investment intent is not limited to my present intention to hold the shares for the minimum capital gains period specified under any applicable tax law, for a deferred sale, for a specified increase or decrease in the market price of the shares, or for any other fixed period in the future.

 

3.                                      I can protect my own interests. I can properly evaluate the merits and risks of an investment in the shares and can protect my own interests in this regard, whether by reason of my own business and financial expertise, the business and financial expertise of certain professional advisors unaffiliated with the Company with whom I have consulted, or my preexisting business or personal relationship with the Company or any of its officers, directors or controlling persons.

 

4.                                      I am informed about the Company. I am sufficiently aware of the Company’s business affairs and financial condition to reach an informed and knowledgeable decision to acquire the shares. I have had opportunity to discuss the plans, operations and financial condition of the Company with its officers, directors or controlling persons, and have received all information I deem appropriate for assessing the risk of an investment in the shares.

 



 

5.                                      I recognize my economic risk. I realize that the purchase of the shares involves a high degree of risk, and that the Company’s future prospects are uncertain. I am able to hold the shares indefinitely if required, and am able to bear the loss of my entire investment in the shares.

 

6.                                      I know that the shares are restricted securities. I understand that the shares are “restricted securities” in that the Company’s sale of the shares to me has not been registered under the Securities Act in reliance upon an exemption for non-public offerings. In this regard, I also understand and agree that:

 

A.                                    I must hold the shares indefinitely, unless any subsequent proposed resale by me is registered under the Securities Act, or unless an exemption from registration is otherwise available (such as Rule 144);

 

B.                                    the Company is under no obligation to register any subsequent proposed resale of the shares by me; and

 

C.                                    the certificate evidencing the shares will be imprinted with a legend which prohibits the transfer of the shares unless such transfer is registered or such registration is not required in the opinion of counsel for the Company.

 

7.                                      I am familiar with Rule 144. I am familiar with Rule 144 adopted under the Securities Act, which in some circumstances permits limited public resales of “restricted securities” like the shares acquired from an issuer in a non-public offering. I understand that my ability to sell the shares under Rule 144 in the future is uncertain, and may depend upon, among other things: (i) the availability of certain current public information about the Company; (ii) the resale occurring more than a specified period after my purchase and full payment (within the meaning of Rule 144) for the shares; and (iii) if I am an affiliate of the Company (A) the sale being made in an unsolicited “broker’s transaction”, transactions directly with a market maker or riskless principal transactions, as those terms are defined under the Securities Exchange Act of 1934, as amended, (B) the amount of shares being sold during any three-month period not exceeding the specified limitations stated in Rule 144, and (C) timely filing of a notice of proposed sale on Form 144, if applicable.

 

8.                                      I now that Rule 144 may never be available. I understand that the requirements of Rule 144 may never be met, and that the shares may never be saleable under the rule. I further understand that at the time I wish to sell the shares, there may be no public market for the Company’s stock upon which to make such a sale, or the current public information requirements of Rule 144 may not be satisfied, either of which may preclude me from selling the shares under Rule 144 even if the relevant holding period had been satisfied.

 

9.                                      I know that I am subject to further restrictions on resale. I understand that in the event Rule 144 is not available to me, any future proposed sale of any of the shares by me will not be possible without prior registration under the Securities Act, compliance with some other registration exemption (which may or may not be available), or each of the following: (i) my written notice to the Company containing detailed information regarding the proposed sale, (ii) my providing an opinion of my counsel to the effect that such sale will not require registration, and (iii) the Company notifying me in writing that its counsel concurs in such opinion. I understand that neither the Company nor its counsel is obligated to provide me with any such opinion. I understand that although Rule 144 is not exclusive, the Staff of the SEC has stated that persons proposing to sell private placement securities other than in a registered offering or pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

 

2



 

10.                               I know that I may have tax liability due to the uncertain value of the shares. I understand that the board of directors believes its valuation of the shares represents a fair appraisal of their worth, but that it remains possible that, with the benefit of hindsight, the Internal Revenue Service may successfully assert that the value of the shares on the date of my purchase is substantially greater than the Board’s appraisal. I understand that any additional value ascribed to the shares by such an IRS determination will constitute ordinary income to me as of the purchase date, and that any additional taxes and interest due as a result will be my sole responsibility payable only by me, and that the Company need not and will not reimburse me for that tax liability.

 

11.                               Residence. The address of my principal residence is set forth on the signature page below.

 

By signing below, I acknowledge my agreement with each of the statements contained in this Investment Representation Statement as of the date first set forth above, and my intent for the Company to rely on such statements in issuing the shares to me.

 

 

 

 

/s/ Sean E. George

 

 

Purchaser’s Signature

 

 

 

 

 

 

 

 

Sean E. George

 

 

Print Name

 

 

 

 

 

 

Address of Purchaser’s principal residence:

 

 

 

 

 

(Personal Address)

 

 

 

3



 

EXHIBIT B

 

STOCK POWER AND ASSIGNMENT

SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Purchase Agreement dated as of July     , 2010, the undersigned hereby sells, assigns and transfers unto                                                   ,                                         (               ) shares of Common Stock of Locus Development, Inc., a Delaware corporation, standing in the undersigned’s name on the books of said corporation represented by certificate number               delivered herewith, and does hereby irrevocably constitute and appoint                             as attorney-in-fact, with full power of substitution, to transfer said stock on the books of said corporation.

 

Dated: July      , 2010

 

 

 

 

(Signature)

 

 

 

Sean E. George

 

(Print Name)

 

 

 

 

 

(Spouse’s Signature, if any)

 

 

 

Jennifer A. Brown

 

(Print Name)

 

This Assignment Separate From Certificate was executed in conjunction with the terms of a Restricted Stock Purchase Agreement between the above assignor and the above corporation, dated as of July     , 2010.

 

Instruction: Please do not fill in any blanks other than the signature and name lines.

 



 

EXHIBIT C

 

JOINT ESCROW INSTRUCTIONS

 

July 15, 2010

 

Locus Development, Inc.

2006 Monroe Ave

Belmont, CA 94002

Attn: Corporate Secretary

 

Dear Secretary:

 

As Escrow Agent for both Locus Development, Inc., a Delaware corporation (the “Company”), and Sean E. George (the “Purchaser”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (the “Agreement”), dated as of July     , 2010, to which a copy of these Joint Escrow Instructions is attached, in accordance with the following instructions:

 

1.                                      In the event that the Company and/or any assignee of the Company (referred to collectively for convenience herein as the “Company”) exercises the Repurchase Option set forth in the Agreement, the Company shall give to the Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. The Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.

 

2.                                      At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company against the simultaneous delivery to you of the purchase price (by check or such other form of consideration mutually agreed to by the parties) for the number of shares of stock being purchased pursuant to the exercise of the Repurchase Option.

 

3.                                      The Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. The Purchaser does hereby irrevocably constitute and appoint you as his or her attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated. Subject to the provisions of this paragraph 3, the Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.

 

4.                                      Upon written request of the Purchaser after each successive one-year period from the date of the Agreement, unless the Repurchase Option has been exercised, you will deliver to the Purchaser a certificate or certificates representing so many shares of stock remaining in escrow as are not then subject to the Repurchase Option. On the date that is 95 days after the date the Purchaser’s status as a service provider (as defined in the Agreement) to the Company terminates, you will deliver to the Purchaser a certificate or certificates representing the aggregate number of shares sold and issued pursuant to the

 


 

Agreement and not purchased by the Company or its assignees pursuant to the exercise of the Repurchase Option.

 

5.                                      If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to the Purchaser, you shall deliver all of same to the Purchaser and shall be discharged of all further obligations hereunder.

 

6.                                      Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

 

7.                                      You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for the Purchaser while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

 

8.                                      The Company and the Purchaser hereby jointly and severally expressly agree to indemnify and hold harmless you and your designees against any and all claims, losses, liabilities, damages, deficiencies, costs and expenses, including reasonable attorneys’ fees and expenses of investigation and defense incurred or suffered by you and your designees, directly or indirectly, as a result of any of your actions or omissions or those of your designees while acting in good faith and in the exercise of your judgment under the Agreement, these Joint Escrow Instructions, exhibits hereto or written instructions from the Company or the Purchaser hereunder.

 

9.                                      You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

 

10.                               You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

 

11.                               You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor. The Company shall reimburse you for any such disbursements.

 

12.                               Your responsibilities as Escrow Agent hereunder shall terminate if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.

 

13.                               You are expressly authorized to delegate your duties as Escrow Agent hereunder to the law firm of Wilson Sonsini Goodrich & Rosati, P.C., or any other law firm, which delegation, if any, may change from time to time and shall survive your resignation as Escrow Agent.

 

2



 

14.                               If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

 

15.                               It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

 

16.                               Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or four days following deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid and return receipt requested, addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by written notice to each of the other parties hereto.

 

COMPANY:

Locus Development, Inc.

 

2006 Monroe Ave.

 

Belmont, CA 94002

 

 

PURCHASER:

Sean E. George

 

 

 

 

ESCROW AGENT:

Corporate Secretary

 

2006 Monroe Ave.

 

Belmont, CA 94002

 

17.                               By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

 

18.                               This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

 

3



 

 

 

Very truly yours,

 

 

 

 

 

LOCUS DEVELOPMENT, INC.

 

 

a Delaware corporation

 

 

 

 

 

 

 

 

By:

/s/ Sean E. George

 

 

 

 

 

Print name:

Sean E. George

 

 

 

 

 

Title:

CEO

 

 

 

 

 

 

 

 

PURCHASER:

 

 

 

 

 

SEAN E. GEORGE

 

 

 

 

 

/s/ Sean E. George

 

 

(Signature)

 

 

 

 

 

 

ESCROW AGENT:

 

 

 

 

 

 

 

 

/s/ Sean E. George

 

 

Sean E. George, Corporate Secretary

 

 

 

(Signature page to Joint Escrow Instructions)

 

4



 

EXHIBIT E

 

SPOUSAL CONSENT

 

I, Jennifer A. Brown, spouse of Sean E. George, have read and approve of the foregoing Restricted Stock Purchase Agreement, dated as of July 15, 2010, together with all exhibits and attachments thereto (collectively, the “Agreement”), by and between my spouse and Locus Development, Inc., a Delaware corporation (the “Company”). In consideration of the Company’s granting of the right to Sean E. George to purchase 1,000,000 shares of Common Stock of the Company as set forth in the Agreement, I hereby appoint Sean E. George as my attorney-in-fact in respect to the exercise or waiver of any rights under the Agreement, and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws of the State of California, or under similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.

 

Dated: July 15, 2010

 

 

Spouse of Purchaser

 

 

 

 

 

/s/ Jennifer A. Brown

 

(Signature)

 

 

 

 

 

Jennifer A. Brown

 

(Print Name)

 



EX-21.1 12 filename12.htm

Exhibit 21.1

 

LIST OF SUBSIDIARIES OF INVITAE CORPORATION

 

Subsidiary

 

Jurisdiction

 

 

 

Invitae International, Inc.

 

Delaware

 

 

 

Invitae Chile SpA

 

Santiago, Chile

 



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