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Invitae Corporation

Table of Contents

As filed with the Securities and Exchange Commission on January 9, 2015.

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

  $86,250,000   $10,023

 

(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 January 9, 2015

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 have applied 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



Table of contents

Prospectus summary

  1

Risk factors

  13

Special note regarding forward-looking statements

  42

Use of proceeds

  44

Dividend policy

  46

Capitalization

  47

Dilution

  49

Selected consolidated financial and other data

  51

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

  53

Business

  69

Management

  98

Executive compensation

  104

Certain relationships and related party transactions

  114

Principal stockholders

  118

Description of capital stock

  120

Material U.S. federal income tax considerations to non-U.S. holders

  124

Shares eligible for future sale

  129

Underwriting

  132

Legal matters

  138

Experts

  138

Where you can find additional information

  138

References

  139

Index to consolidated financial statements

  F-1

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. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. We are responsible for the information contained in this prospectus.

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, or OMIM, a compendium of human genes maintained by Johns Hopkins University School of Medicine, 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.

 

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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 December 2014, genetests.org estimated that there were more than 40,000 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 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 161 people as of December 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. In the future, we plan on expanding our efforts in carrier and newborn testing markets and later into the health and wellness market. 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, which allows our clients to receive test results on any or all genes in a specific indication or multi-gene panel. 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. In addition, clients may obtain test results on genes that are in other indications or panels, or genes within the same indication or panel more than 90 days after the date of the initial service, for an additional fee. Importantly, we are

 

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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.

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 through September 30, 2014, 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 grew significantly in 2014 from over 200 tests in the first quarter of 2014 to over 1,100 tests in the third quarter of 2014, which we believe is evidence that our value proposition is attractive to our clients. In addition, we delivered over 1,800 billable tests in the fourth quarter of 2014. We cannot assure you that we will continue to experience this level of growth. 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 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.

 

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In 2015, we plan to introduce substantial improvements to our genetic testing platform including certain genes with features that are more difficult to analyze and an expansion of our current assay of 216 genes to over 500 genes. This expanded offering would double the amount of genetic content we are able to provide at a fixed cost, which would further drive down the cost per reportable gene.

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 reportable gene over time.

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

 

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    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.

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 quickly and easily 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.

 

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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.

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.

 

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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.

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 146,695,962 shares outstanding as of September 30, 2014, including 180,969 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 35,500,000 shares of common stock issuable upon the conversion of Series F convertible preferred stock issued in October 2014), and excludes:

8,243,351 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2014 under our 2010 Stock Incentive Plan, or the 2010 Stock Plan, at a weighted-average exercise price of $0.40 per share;

3,620,000 shares of common stock issuable upon the exercise of options granted after September 30, 2014 under our 2010 Stock Plan at an exercise price of $1.45 per share;

25,500,000 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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1,950,000 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 nine months ended September 30, 2013 and 2014, and the condensed consolidated balance sheet data as of September 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.

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

Consolidated Statements of Operations Data:

                         

Revenue

  $   $ 148   $ 60   $ 729  

Costs and operating expenses:

                         

Cost of revenue(1)

        667     441     3,263  

Research and development(1)

    5,557     16,039     10,621     15,600  

Selling and marketing(1)

        2,431     1,599     5,823  

General and administrative(1)

    3,004     5,764     4,037     8,112  
       

Total costs and operating expenses

    8,561     24,901     16,698     32,798  
       

Loss from operations

    (8,561 )   (24,753 )   (16,638 )   (32,069 )

Other income (expense), net

    2     (26 )   (25 )   (69 )

Interest expense

    (43 )   (59 )   (44 )   (49 )
       

Net loss

  $ (8,602 ) $ (24,838 ) $ (16,707 ) $ (32,187 )
       

Net loss attributable to common stockholders(2)

  $ (9,014 ) $ (24,989 ) $ (16,858 ) $ (32,187 )
       

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

  $ (2.36 ) $ (6.02 ) $ (4.13 ) $ (6.54 )
       

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

    3,814,255     4,150,519     4,078,837     4,918,489  
       

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

        $ (0.41 )       $ (0.36 )
                       

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

          60,977,738           89,280,782  
   

 

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  Year ended
December 31,
  Nine months ended
September 30,
 
 
  2012
  2013
  2013
  2014
 
   

Other operating data:

                         

Billable tests(3)

        229     145     1,819  
   

(1)    Includes stock-based compensation as follows:

 
  Year ended
December 31,
  Nine months ended
September 30,
 
(In thousands)
  2012
  2013
  2013
  2014
 
   
 
   
   
  (Unaudited)
 

Cost of revenue

  $   $ 11   $ 7   $ 47  

Research and development

    46     165     106     231  

Selling and marketing

        42     26     90  

General and administrative

    19     42     26     170  
       

Total stock-based compensation

  $ 65   $ 260   $ 165   $ 538  
   

(2)    See Notes 2 and 10 to our audited consolidated financial statements and Note 7 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.

(3)    Billable tests represent the number of tests performed in a period that are billable to third-party payors, institutions or patients. We consider the number of billable tests to be an important indicator of the growth in our business.

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

 
   
 
  (Unaudited)
 

Consolidated balance sheet data:

                   

Cash and cash equivalents

  $ 59,138   $ 127,589   $    

Working capital

    53,527     121,978        

Total assets

    73,147     141,598        

Capital lease obligation

    1,377     1,377        

Convertible preferred stock

    133,907            

Accumulated deficit

    (69,875 )   (69,875 )      

Total stockholders' equity (deficit)

    (68,767 )   133,591        
   

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

on an actual basis;

on a pro forma basis to give effect to the issuance of an aggregate of 35,500,000 shares of our Series F convertible preferred stock in October 2014 and the automatic conversion of all outstanding shares of our convertible preferred stock as of September 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.

 

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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, 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 nine months ended September 30, 2014, we had a net loss of $24.8 million and $32.2 million, respectively. As of September 30, 2014, we had an accumulated deficit of $69.9 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

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systems, expand our customer service, billing and systems processes and enhance our internal quality 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. Because broad-based testing panels are relatively new, it may be more difficult or take more time for us to expand clinical adoption of our assay beyond a relatively small number of early adopters. 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. In addition, as we make physicians aware of our plans to release new assays with more genes, physicians may decide not to order our current assay, opting instead to wait until the new assay is available. 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

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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.

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

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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 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;

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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.

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

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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 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

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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 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 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

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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 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.

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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 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.

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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 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

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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 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 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. In November 2014, we obtained CAP accreditation for our San Francisco laboratory. Failure to maintain 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 program, 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 November 2014, CMS published a final determination that sets 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 146,930,748 shares outstanding as of December 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 146,930,748 shares outstanding as of December 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.

Although we currently intend to use the net proceeds from this offering in the manner described in the section entitled "Use of Proceeds" in this prospectus, we will have considerable discretion in the application 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.

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

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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 December 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;

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;

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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 assay and develop new assays 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;

our expectations with respect to our near-term plan of operation;

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 of and our ability to introduce improvements to our genetic testing platform and to expand our current assay to include additional genes;

our expectations with respect to future hirings;

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

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;

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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;

our ability to obtain funding for our operations;

our financial performance;

our expectations regarding our future revenue, cost of revenue, operating expenses and capital expenditures, and our 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. We currently intend to use the proceeds from this offering as follows:

between approximately $          million and $          million for research and development, including assay development, software development for our analysis pipeline and our clinical report optimization platform, or CROP;

between approximately $          million and $          million for selling and marketing activities, including development and operation of our web site for taking and delivering customer orders, hiring sales, customer service and marketing personnel, and marketing programs, including attendance at conferences;

between approximately $          million and $          million for capital expenditures, including investment in additional laboratory capacity, sample preparation and sequencing equipment and computer systems for generating, analyzing and storing genetic information; and

the remainder for corporate and administrative expenses (including personnel-related costs and costs associated with operating as a public company), and for working capital and other general corporate purposes.

The expected use of the net proceeds from this offering described above represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures depend on numerous factors, including competitive and technological developments, the number of billable tests we perform, our success in obtaining reimbursement, our ability to lower the costs associated with performing our tests, the amount of cash generated by our operations, the timing and amount of investments in our business, demand for tests with expanded genetic content, demand for enhancement of our analysis pipeline and CROP to service greater assay volume potentially at reduced turnaround times, utilization of our website for taking and delivering customer orders, the need for sales, customer service and marketing personnel to drive demand and address customer requirements, and the need for increased amounts of laboratory capacity, sample preparation and sequencing equipment and computer systems for generating, analyzing and storing genetic information. If our development of additional assays or systems

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requires more resources than we anticipate, we may allocate additional proceeds from this offering to our research and development activities. If market acceptance of and reimbursement for our assays is slower than we anticipate, we may reallocate a portion of the proceeds from research and development and capital expenditures to selling and marketing activities.

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. Accordingly, 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 September 30, 2014, as follows:

on an actual basis;

on a pro forma basis to give effect to the issuance of an aggregate of 35,500,000 shares of our Series F convertible preferred stock in October 2014 and the automatic conversion of all outstanding shares of our convertible preferred stock as of September 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 September 30, 2014  
(In thousands, except share and per share data)
  Actual
  Pro forma
  Pro forma
as adjusted(1)

 

 

 

                   
 
  (Unaudited)
 

Cash and cash equivalents

  $ 59,138   $ 127,589   $    
       

Capital lease obligation

    1,377     1,377        

Convertible preferred stock, par value $0.0001 per share: 116,131,524 shares authorized, 105,631,524 issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

    133,907            

Stockholders' equity (deficit):

                   

Preferred stock, par value $0.0001 per share: no shares authorized, issued or outstanding, actual or pro forma; 20,000,000 shares authorized, no shares issued or outstanding pro forma as adjusted

               

Common stock, par value $0.0001 per share: 135,131,524 shares authorized, 5,383,469 shares issued and outstanding, actual; 400,000,000 shares authorized, 146,514,933 shares issued and outstanding, pro forma;              shares issued and outstanding, pro forma as adjusted

        15        

Additional paid-in capital

    1,108     203,451        

Accumulated deficit

    (69,875 )   (69,875 )      
       

Total stockholders' equity (deficit)

    (68,767 )   133,591        
       

Total capitalization

  $ 66,517   $ 134,968   $    
   

(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 September 30, 2014 would be $              , $              , $              , $              and                           , respectively.

The number of shares of common stock in the table above is based on 146,514,993 shares outstanding as of September 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 35,500,000 shares of common stock issuable upon the conversion of Series F convertible preferred stock issued in October 2014), and excludes:

8,243,351 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2014, at a weighted-average exercise price of $0.40 per share;

180,969 shares of common stock issued in connection with the early exercise of options, which are subject to our right of repurchase as of September 30, 2014;

5,192,215 shares of common stock reserved for future issuance under our 2010 Stock Plan as of September 30, 2014;

25,500,000 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

1,950,000 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 September 30, 2014 through December 31, 2014, we granted options to purchase 3,620,000 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 September 30, 2014 was approximately $69.2 million, or approximately $12.86 per share, based on 5,383,469 shares of common stock outstanding as of September 30, 2014. Net tangible book value per share is determined by dividing the number of shares of common stock outstanding as of September 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 35,500,000 shares of our Series F convertible preferred stock in 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 September 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 September 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 September 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 September 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 146,514,993 shares outstanding as of September 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 35,500,000 shares of common stock issuable upon the conversion of Series F convertible preferred stock issued in October 2014), and excludes:

8,243,351 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2014, at a weighted-average exercise price of $0.40 per share;

180,969 shares of common stock issued in connection with the early exercise of options, which are subject to our right of repurchase as of September 30, 2014;

5,192,215 shares of common stock reserved for future issuance under our 2010 Stock Plan as of September 30, 2014;

25,500,000 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

1,950,000 shares of common stock, subject to an increase on an annual basis, reserved for future issuance under the ESPP.

Subsequent to September 30, 2014 through December 31, 2014, we granted options to purchase 3,620,000 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 nine months ended September 30, 2013 and 2014 and the selected consolidated balance sheet data as of September 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.

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

Consolidated statements of operations data:

                         

Revenue

  $   $ 148   $ 60   $ 729  

Costs and operating expenses:

                         

Cost of revenue(1)

        667     441     3,263  

Research and development(1)

    5,557     16,039     10,621     15,600  

Selling and marketing(1)

        2,431     1,599     5,823  

General and administrative(1)

    3,004     5,764     4,037     8,112  
       

Total costs and operating expenses

    8,561     24,901     16,698     32,798  
       

Loss from operations

    (8,561 )   (24,753 )   (16,638 )   (32,069 )

Other income (expense), net

    2     (26 )   (25 )   (69 )

Interest expense

    (43 )   (59 )   (44 )   (49 )
       

Net loss

  $ (8,602 ) $ (24,838 ) $ (16,707 ) $ (32,187 )
       

Net loss attributable to common stockholders(2)

  $ (9,014 ) $ (24,989 ) $ (16,858 ) $ (32,187 )
       

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

  $ (2.36 ) $ (6.02 ) $ (4.13 ) $ (6.54 )
       

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

    3,814,255     4,150,519     4,078,837     4,918,489  

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

        $ (0.41 )       $ (0.36 )
                       

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

          60,977,738           89,280,782  
   

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  Year ended
December 31,
  Nine months ended
September 30,
 
 
  2012
  2013
  2013
  2014
 
   

Other operating data:

                         

Billable tests(3)

        229     145     1,819  
   

(1)    Includes stock-based compensation as follows:

 
   
   
  (Unaudited)
 
 
  Year ended
December 31,
  Nine months ended
September 30,
 
(In thousands)
  2012
  2013
  2013
  2014
 
   

Cost of revenue

  $   $ 11   $ 7   $ 47  

Research and development

    46     165     106     231  

Selling and marketing

        42     26     90  

General and administrative

    19     42     26     170  
       

Total stock-based compensation

  $ 65   $ 260   $ 165   $ 538  
   

(2)    See Notes 2 and 10 to our audited consolidated financial statements and Note 7 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.

(3)    Billable tests represent the number of tests performed in a period that are billable to third-party payors, institutions or patients. We consider the number of billable tests to be an important indicator of the growth in our business.

   
 
  As of December 31,    
 
 
  As of September 30,
2014

 
(In thousands)
  2012
  2013
 
   
 
   
   
  (Unaudited)
 

Consolidated balance sheet data:

                   

Cash and cash equivalents

  $ 21,801   $ 43,070   $ 59,138  

Working capital

    21,043     41,577     53,527  

Total assets

    25,973     53,103     73,147  

Capital lease obligations

    1,215     2,001     1,377  

Convertible preferred stock

    36,755     86,574     133,907  

Accumulated deficit

    (12,850 )   (37,688 )   (69,875 )

Total stockholders' deficit

    (12,759 )   (37,280 )   (68,767 )
   

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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 December 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, which allows our clients to receive test results on any or all genes in a specific indication or multi-gene panel. 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. In addition, clients may obtain test results on genes that are in other indications or panels, or genes within the same indication or panel more than 90 days after the date of initial service, for an additional fee. 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 $60,000 for the nine months ended September 30, 2013 to $0.7 million for the nine months ended September 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 $16.7 million and $32.2 million for the nine months ended September 30, 2013 and 2014, respectively. As of September 30, 2014, we had an accumulated deficit of $69.9 million. We also increased our number of employees from 44 on January 1, 2013 to 161 employees as of December 31, 2014. Our sales force grew from one person in the first quarter of 2014 to nine people in the fourth quarter of 2014.

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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 1,100 tests in the third quarter of 2014, which we believe is evidence that our value proposition is attractive to our clients. In addition, we delivered over 1,800 billable tests in the fourth quarter of 2014. We cannot assure you we will continue to experience this level of growth. 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 26% of billable tests have been paid. On a historical basis through September 30, 2014, approximately 44% of the billable tests we performed have been billable to institutions and patients, and the remainder have been billable to third-party payors. Many of the gene tests on our assay are tests for which private insurers reimburse. However, because we do not have reimbursement policies or contracts with very many private insurers, our claims for reimbursement from them 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. Even if we are successful achieving reimbursement, we may be paid at lower rates than if we were under contract with the third-party payor. When 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.

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, which we refer to as billable tests. 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. We believe the number of billable tests in any period is an important indicator of the growth in our business.

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

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Medicare and Medicaid Services, or CMS, is an important factor in gaining adoption by ordering physicians. We recently received approval as a Medicare provider, which allows us to bill for our services to Medicare patients. Further, in October 2014 we entered into a reimbursement contract with Blue Shield of California. 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.

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 nine months ended September 30, 2014, amounts billed for tests delivered totaled $0.3 million and $3.1 million, respectively. As of December 31, 2013, we had recognized revenue of $0.1 million related to amounts billed for tests delivered during the year ended December 31, 2013. As of September 30, 2014, we had recognized revenue of $0.1 million related to amounts billed for tests delivered during the year ended December 31, 2013 and $0.6 million related to amounts billed for tests delivered during the nine months ended September 30, 2014. 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

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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.

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

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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 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

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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 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 $0.2 million and $0.5 million for the nine months ended September 30, 2013 and 2014. As of September 30, 2014, we had $2.1 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, which we expect to recognize over a weighted-average period of 3.1 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.

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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 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 nine months ended September 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.

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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 September 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.

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.

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Results of operations

Comparison of the nine months ended September 30, 2013 and 2014

   
 
  Nine months ended September 30,    
   
 
 
  Dollar
change

  %
change

 
(In thousands)
  2013
  2014
 
   

Revenue

  $ 60   $ 729   $ 669     *  
             

Costs and operating expenses:

                         

Cost of revenue

    441     3,263     2,822     640 %

Research and development

    10,621     15,600     4,979     47 %

Selling and marketing

    1,599     5,823     4,224     264 %

General and administrative

    4,037     8,112     4,075     101 %
             

Total operating expenses

    16,698     32,798     16,100     96 %
             

Loss from operations

    (16,638 )   (32,069 )   (15,431 )   93 %

Other expense, net

    (25 )   (69 )   (44 )   176  

Interest expense

    (44 )   (49 )   (5 )   11 %
             

Net loss

  $ (16,707 ) $ (32,187 ) $ (15,480 )   93 %
   

*      Not meaningful

Revenue

Revenue increased $0.7 million for the nine months ended September 30, 2014 compared to the $60,000 recognized in the same period in 2013. Revenue for the nine months ended September 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 $2.8 million, or 641%, for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to a $1.8 million increase in costs of reagents, laboratory materials and test validation costs and a $0.9 million increase in personnel costs related to the increase in headcount. The number of billed test results delivered increased from 145 for the nine months ended September 30, 2013 to 1,819 in the same period in 2014.

Research and development

Research and development expenses increased $5.0 million, or 47%, for the nine months ended September 30, 2014 compared to the same period in 2013. The increase was primarily driven by a $3.3 million increase in personnel costs related to the increase in headcount, a $1.2 million increase in allocated facilities-related expenses due to the expansion of our operations into two additional locations and a $0.4 million increase in costs of laboratory materials.

Selling and marketing

Selling and marketing expenses increased $4.2 million, or 264%, for the nine months ended September 30, 2014 compared to the same period in 2013. The increase was due to a $2.3 million increase in personnel costs and travel related expenses due to the increase in headcount, a $0.7 million increase in conferences, marketing activities and trade show-related expenses, a $0.5 million increase in consulting fees incurred in connection with various marketing and branding activities, and a $0.4 million increase related to an increase in allocated technology and facilities related expenses as the result of our office expansion.

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General and administrative

General and administrative expenses increased $4.1 million, or 101%, for the nine months ended September 30, 2014 compared to the same period in 2013. The increase was due to a $1.6 million increase in legal costs incurred primarily related to the Myriad litigation matter, a $1.0 million increase in personnel costs resulting from an increase in headcount, a $0.8 million increase in professional services to support our increasing infrastructure as we expand our operations and prepare to become a public company, and a $0.6 million increase related to an increase in allocated technology and facilities related expenses as the result of our office expansion.

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.

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.

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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 seven most recent quarters in the period ended September 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 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

  Sept 30,
2014

 
   

Revenue

  $   $ 6   $ 54   $ 88   $ 118   $ 301   $ 310  

Costs and operating expenses:

                                           

Cost of revenue

    107     145     189     226     611     963     1,689  

Research and development

    2,589     3,576     4,456     5,418     4,965     5,078     5,557  

Selling and marketing

    396     538     665     832     1,666     1,771     2,386  

General and administrative

    1,131     1,159     1,747     1,727     1,895     3,005     3,212  
       

Total operating expenses

    4,223     5,418     7,057     8,203     9,137     10,817     12,844  
       

Loss from operations

    (4,223 )   (5,412 )   (7,003 )   (8,115 )   (9,019 )   (10,516 )   (12,534 )

Other income (expense), net

    1     1     (27 )   (1 )   3     (6 )   (66 )

Interest expense

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

Net loss

  $ (4,236 ) $ (5,427 ) $ (7,044 ) $ (8,131 ) $ (9,033 ) $ (10,539 ) $ (12,615 )
   

 

   
 
  Three months ended  
 
  Mar 31,
2013

  June 30,
2013

  Sept 30,
2013

  Dec 31,
2013

  Mar 31,
2014

  June 30,
2014

  Sept 30,
2014

 
   

Other operating data:

                                           

Billable tests

    21     52     72     84     206     496     1,117  
   

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Quarterly trends

Revenue increased quarter over quarter through September 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 $2.0 million, $0.8 million, $0.3 million, $0.1 million, $95,000, $70,000 and $28,000 for the three months ended September 30, 2014, 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 September 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.

Liquidity and capital resources

Liquidity and capital expenditures

Since inception, our operations have been financed primarily by net proceeds of $133.9 million from sales of our convertible preferred stock through September 30, 2014. In addition, we have entered into various capital lease agreements for an aggregate financing amount of $3.7 million from inception through September 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 September 30, 2014, we had $43.1 million and $59.1 million of cash and cash equivalents, respectively.

In October 2014, we issued 35,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate proceeds of $68.5 million, net of issuance costs of $2.5 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.

Our cash and cash equivalents as of December 31, 2014 were $107.4 million. We believe that our existing cash and cash equivalents as of December 31, 2014, along with 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

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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,
  Nine months ended
September 30,
 
(In thousands)
  2012
  2013
  2013
  2014
 
   
 
   
   
  (Unaudited)
 

Cash used in operating activities

  $ (9,154 ) $ (23,030 ) $ (15,428 ) $ (28,104 )

Cash used in investing activities

    (826 )   (4,580 )   (3,898 )   (2,685 )

Cash provided by financing activities

    28,802     48,879     9,486     46,857  
   

Cash flows from operating activities

For the nine months ended September 30, 2014, cash used in operating activities was $28.1 million. The net cash outflow from operations primarily resulted from our net loss of $32.2 million offset by non-cash charges of $1.6 million for depreciation and amortization, and $0.5 million for stock-based compensation. The change in net operating assets of $1.9 million was primarily due to an increase in accounts payable and accrued liabilities of $3.3 million due to the growth in our business partially offset by an increase in prepaid expenses of $0.7 million related to prepaid equipment maintenance fees and software license fees and in other assets of $0.7 million related to the security deposit on our new office lease of $0.2 million and the capitalization of $0.5 million of offering expenses.

For the nine months ended September 30, 2013, cash used in operating activities was $15.4 million. The net cash outflow from operations primarily resulted from our net loss of $16.7 million offset by $0.6 million for depreciation and amortization and non-cash charges of $0.2 million for stock-based compensation. The change in net operating assets of $0.5 million was primarily due to the $0.8 million increase in payables to the suppliers due to the growth in our business partially offset by a $0.3 million increase in prepaid expenses related to prepaid equipment maintenance fees and software license fees.

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.

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Cash flows from investing activities

Cash used in investing activities of $2.7 million for the nine months ended September 30, 2014 was primarily related to the purchase of property and equipment.

Cash used in investing activities of $3.9 million for the nine months ended September 30, 2013 was primarily related to the purchase of property and equipment. In addition, amounts held as restricted cash increased by $60,000.

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 provided by financing activities for the nine months ended September 30, 2014 of $46.9 million was primarily from $47.3 million in net proceeds from the issuance of convertible preferred stock, partially offset by payments of $0.6 million on our capital lease obligations.

Cash provided by financing activities for the nine months ended September 30, 2013 of $9.5 million was primarily from $9.9 million in proceeds from the issuance of convertible preferred stock, partially offset by payments of $0.5 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.

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  
   

In November 2014, we leased additional space in San Francisco, California. The lease expires in April 2017 and aggregate future minimum lease payments for this facility are $1.7 million.

In December 2014, we entered into a capital lease for laboratory equipment. The term of the lease is 36 months and the minimum lease payments due under the agreement are $3.1 million.

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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 $1.4 million as of December 31, 2013 and September 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 $59.1 million as of December 31, 2013 and September 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.

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

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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. In the future, we plan on expanding our efforts in carrier and newborn testing markets and later into the health and wellness market. 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

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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 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, CAP-accredited 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, which allows our clients to receive test results on any or all genes in a specific indication or multi-gene panel. 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. In addition, we delivered over 1,800 billable tests in the fourth quarter of 2014. We cannot assure you that we will continue to experience this level of growth. We have a multi-disciplinary team of 161 people as of December 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

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which approximately 60%, or $3 billion, was genetic testing. As of December 2014, genetests.org estimated that there were more than 40,000 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 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

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phenomena which should not be patentable. These recent cases have ushered in an era of broader participation in the market for genetic testing services.

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, which allows our clients to receive test results on any or all genes in a specific indication or multi-gene panel. 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. In addition, clients may obtain test results on genes that are in other indications or panels, or genes within the same indication or panel more than 90 days after the date of initial service, for an additional fee. 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 1,100 tests in the third quarter of 2014, which we

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believe is evidence that our value proposition is attractive to our clients. In addition, we delivered over 1,800 billable tests in the fourth quarter of 2014. We cannot assure you that we will continue to experience this level of growth. 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 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):

GRAPHIC

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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, which we refer to as our clinical report optimization platform, or CROP, 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

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    increase the reporting throughput while at the same time standardize 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:

GRAPHIC

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 $15.6 million in 2012, 2013 and the nine months ended September 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 quickly and easily 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 recently been accepted as a Medicare provider. Further, in October 2014 we entered into a reimbursement contract with Blue Shield of California.

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 and there is no CPT code for the full panel, but the panel 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.

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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 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. For the subset of patients in the study who had

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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 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.

In 2015, we plan to introduce substantial improvements to our genetic testing platform including certain genes with features that are more difficult to analyze and an expansion of our current assay of 216 genes to over 500 genes. This expanded offering would double the amount of genetic content we are able to provide at a fixed cost, which would further drive down the cost per reportable gene.

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 reportable gene over time.

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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.

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. We may also be able to provide prospective parents with carrier testing for possible genetic conditions. 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

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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. Patients could donate their genetic information to the research community. Pharmaceutical companies may seek to identify individuals with a particular genetic profile and medical history to participate in clinical trials of new treatments. Patients may be interested in accessing marketing information on healthcare products appropriate for their healthcare needs.

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 quickly and easily build, modify, share and save relevant family genetic and health history information. All data is stored in a HIPAA-compliant cloud computing 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:

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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,

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    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 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;

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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.

Near-term plan of operation

From the date of this prospectus through June 30, 2015, we plan to primarily focus on increasing adoption of, and reimbursement for, our assay of 216 genes, expanding our commercial operations and advancing our assay of over 500 genes from clinical validation into commercial availability in 2015, working on future generations of our assays to support continued expansion of our genetic content, and continuing to automate our laboratory and medical interpretation processes. We anticipate that we will invest heavily in our business through June 30, 2015 in connection with the implementation of our strategy.

Specifically, we expect our research and development expenses will increase as we invest in developing additional assays, software analysis pipelines, report optimization systems for interpreting and reporting test results, and digital tools for use by clinicians and their patients. We also expect our selling and marketing expenses will increase as we hire additional sales, marketing and customer service personnel, further develop our web infrastructure and undertake additional marketing efforts through appearances at conferences and tradeshows in order to promote Invitae and to educate clinicians about our assay. Additionally, we expect that our general and administrative expenses will increase as we incur additional expenses necessary to comply with our obligations as a publicly-traded company and expand our billing and client services functions to support anticipated increased demand for our tests. We believe that the estimated net proceeds from this offering, together with our existing cash and cash equivalents, will be sufficient to meet our anticipated cash requirements for at least the next 12 months, and as such, we do not expect it will be necessary to raise additional capital during that period.

We believe that we will require additional laboratory capacity in 2016 in order to meet the currently-anticipated demand for our assays, and we expect to incur approximately $7.5 million in capital expenditures through June 30, 2015 to outfit our new laboratory and acquire laboratory equipment and computer systems necessary for the anticipated growth of our business. We anticipate that we will also lease additional office space in locations where we believe there is a pool of talent with the skills we need in order to continue to expand our business. We also plan to continue hiring employees to support the anticipated growth in our business, including in production, selling and marketing, research and development, and general and administrative functions. From September 30, 2014 through June 30, 2015, we expect to increase our headcount by approximately 25 to 30 full-time employees per quarter.

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Our expectations with respect to our near-term operating plan and ability to effectively execute on this plan are subject to a number of factors and risks, and many of which are outside of our control. If one or more of these events were to occur, it may be necessary for us to shift our priorities and our plans, abandon or delay one or more of our planned activities, or otherwise adjust our proposed near- and long-term business plans. Please see "Risk Factors" for a discussion of some of these risks and events, and their potential effects on our business.

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 final determination under the Medicare Clinical Laboratory Fee Schedule, or CLFS, published in November 2014, CMS 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 December 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

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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.

PAMA codified Medicare coverage rules for laboratory tests by requiring any local coverage determination to be made following the local coverage determination process. 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 laboratory in California is 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 laboratory in California. 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 Florida, Maryland, Pennsylvania and Rhode Island.

Our clinical reference laboratory in California is 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

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State Department of Health, or NYDOH, before they are performed on samples 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 laboratory is 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.

There are also federal laws related to 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 any amounts paid by the entity to the government in fines or settlement. When an entity is determined to

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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 of natural correlations, such as the correlation between drug metabolite levels in a patient and that drug's

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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 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

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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 Judicial 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.

Raw materials and 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 reagents, as well as sequencers and other equipment and materials which we use in our laboratory operations. 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. 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 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 would be able to secure alternative equipment, reagents and other

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materials, or bring such equipment, reagents and materials on line and revalidate them without experiencing interruptions in our workflow. If we encounter delays or difficulties in securing, reconfiguring or revalidating the equipment and reagents we require for our tests, our business and reputation could be adversely affected.

Customer and geographic concentrations

In 2013 and for the nine months ended September 30, 2014, the percentages of our revenue attributable to sources in the United States were 42 and 64, respectively; the percentages of our revenue attributable to sources in Canada were one and 21, respectively; the percentages of our revenue attributable to sources in Israel were 44 and 12, respectively; and the percentages of our revenue attributable to countries excluding the United States, Canada and Israel were 13 and three, respectively.

As of December 31, 2012 and 2013, and September 30, 2014, we had net long-lived assets in the United States of $2.7 million, $5.9 million and $8.9 million, respectively, and net long-lived assets in Chile of $0, $2.2 million and $1.9 million, respectively. As of December 31, 2012 and 2013, and September 30, 2014 we did not have long-lived assets outside of the United States and Chile.

As of September 30, 2014, all of our revenue has been derived from sales of our assay of 216 genes. Teva Pharmaceuticals Industries Ltd. accounted for 44% and 12% of our revenue for the year ended December 31, 2013 and for the nine months ended September 30, 2014, respectively. In 2012, 2013 and for the nine months ended September 30, 2014, no other customer represented 10% or more of our revenue. For the nine months ended September 30, 2014, our ten largest customers accounted for approximately 35% of billable tests delivered.

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 August 2017, with a five-year extension at our option. 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 lease approximately 12,286 square feet of office space at another location in San Francisco under an agreement that expires in April 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 also lease approximately 200 square feet of additional laboratory space in Santiago, Chile, pursuant to a lease agreement that expires in May 2015, with an automatic renewal period of two additional years.

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

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

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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 December 31, 2014, we had 161 employees, the significant majority of which are based in San Francisco or Palo Alto, California. Of these employees, 77 were in research and development, 12 were in commercial laboratory operations, 44 were in sales and marketing and 28 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 December 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.(1)(2)(3)

  52   Director

Geoffrey S. Crouse(1)(2)(3)

  44   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 was a consultant, advisor and angel investor. 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 four 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 director will be Geoffrey S. Crouse and his term will expire at the first annual meeting of stockholders following the date of this prospectus;

Our Class II director will be Randal W. Scott and his term will expire at the second annual meeting of stockholders following the date of this prospectus; and

Our Class III directors will be Eric Aguiar and Sean E. George 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 Eric Aguiar and Geoffrey S. Crouse 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

Dr. Aguiar and Mr. Crouse serve on our audit committee. Dr. Aguiar 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 each Dr. Aguiar and Mr. Crouse 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

Dr. Aguiar and Mr. Crouse serve on our compensation committee. Mr. Crouse 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

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reviews and 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

Dr. Aguiar and Mr. Crouse serve on our nominating and corporate governance committee. Dr. Aguiar 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 the fiscal year ended December 31, 2014:

   
Name
  Fees earned or
paid in cash

  Option
awards

  Total
 
   

Eric Aguiar, M.D.(1)

             

Geoffrey S. Crouse

    $20,000   $ 10,842 (2) $ 30,842  
   

(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 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. 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.

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

2014 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, 2014. 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. 

    2014     203,703         203,703  

Chairman and Chief Executive Officer

                         

Sean E. George, Ph.D. 

    2014     281,857     454,355 (2)   736,212  

President and Chief Operating Officer

                         

Lisa Alderson

    2014     286,646     251,405 (3)   538,051  

Chief Commercial Officer

                         
   

(1)    The amounts in this column represent the aggregate fair value of the option awards computed as of the grant dates in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the individual. 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.

(2)    On each of February 28, 2014 and October 15, 2014, we granted Dr. George an option to acquire 300,000 shares of our common stock at an exercise price of $0.57 and $1.45 per share, respectively. 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.

(3)    On February 28, 2014 and October 15, 2014, we granted Ms. Alderson an option to acquire 200,000 shares and 150,000 shares, respectively, of our common stock at an exercise price of $0.57 and $1.45 per share, respectively. 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.

2014 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, 2014:

   
 
   
  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,

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

Ph.D.

  2-28-14     0     300,000     0.57     2-28-24 (2)            

  10-15-14     0     300,000     1.45     10-15-24 (2)            

Lisa Alderson

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

  11-16-12                             41,667 (1)(3)     (4)

  2-28-14     0     200,000     0.57     2-28-24 (2)            

  10-15-14     0     150,000     1.45     10-15-24 (2)            
   

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

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(2)    The option vests 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.

(3)    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.

(4)   As there was no public market value for our common stock as of December 31, 2014, 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.

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.

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 December 31, 2014, options to purchase a total of 11,540,728 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

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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 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

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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 January 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.

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.

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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) 25,500,000 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 January 1, 2016 and ending on (and including) January 1, 2025, in an amount equal to the lesser of (1) 4% 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 101,000,000 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 12,000,000 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 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

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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 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.

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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 12,000,000 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 $10,000,000.

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 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

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    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 January 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 1,950,000 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) 1% 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 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

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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.

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;

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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 58,333 shares were vested as of December 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 62,255 shares were vested as of December 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 September 2010 at $0.44 per share.

(6)   Issued in March 2011 at $0.55 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 December 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 146,930,748 shares of common stock outstanding at December 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 December 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     14.0%        

Sean E. George, Ph.D.(1)

    1,211,363     *        

Lisa Alderson(2)

    352,172     *        

Eric Aguiar, M.D.(3)

    22,394,764     15.2%        

Geoffrey S. Crouse(4)

    130,554     *        

All current executive officers and directors as a group (6 persons)(5)

    44,855,584     30.4%        

5% Stockholders:

                   

Baker Brothers Life Sciences, L.P. and affiliates(6)

    30,303,921     20.6%        

BlackRock, Inc.(7)

    25,000,000     17.0%        

Thomas, McNerney & Partners II, L.P. and affiliates(3)

    22,394,764     15.2%        

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 200,000 shares of common stock exercisable within 60 days of December 31, 2014.

(2)    Includes options to purchase 206,250 shares of common stock exercisable within 60 days of December 31, 2014 and 100,000 shares of common stock acquired upon the early exercise of options to purchase common stock, of which 41,667 shares are subject to our right of repurchase as of December 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 15,000 shares of common stock exercisable within 60 days of December 31, 2014 and 90,554 shares of common stock acquired upon the early exercise of options to purchase common stock, of which 28,299 shares are subject to our right of repurchase as of December 31, 2014.

(5)    Includes options to purchase an aggregate of 550,625 shares of common stock exercisable within 60 days of December 31, 2014 and 190,554 shares of common stock acquired upon the early exercise of options to purchase common stock, of which 69,966 shares are subject to our right of repurchase as of December 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 420,000,000 shares, par value of $0.0001 per share, of which:

400,000,000 shares will be designated as common stock; and
20,000,000 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 December 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 5,799,224 shares of common stock outstanding as of December 31, 2014, held of record by 39 stockholders. In addition, as of December 31, 2014, 11,540,728 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 20,000,000 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 66 2 / 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 66 2 / 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 American Stock Transfer & Trust Company, LLC. The transfer agent's address is 6201 15th Avenue, Brooklyn, New York 11219.

Listing

We have applied 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 December 31, 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 180,969 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 11,540,728 shares of our common stock that were subject to stock options outstanding as of December 31, 2014, options to purchase an aggregate of 2,407,218 shares of common stock were vested as of December 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 list our common stock on the New York Stock Exchange under the symbol "NVTA."

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

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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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References

Michael O. Dorschner, et al, "Actionable, Pathogenic Incidental Findings in 1,000 Participants' Exomes," The American Journal of Human Genetics 93, 631 640, October 3, 2013.

Jody Lynn Kujovich, "Factor V Leiden thrombophilia," Genetics in Medicine (2011) 13, 1-16, January 2011.

Allison W. Kurian, et al, "Clinical Evaluation of a Multiple-Gene Sequencing Panel for Hereditary Cancer Risk Assessment," Journal of Clinical Oncology 32 (19), July 1, 2014.

National Cancer Institute at the National Institutes of Health, "Genetic Testing for Heredity Cancer Syndromes," http://www.cancer.gov/cancertopics/factsheet/Risk/genetic-testing, updated April 11, 2013, accessed December 5, 2014.

National Institute of Neurological Disorders and Stroke at the National Institutes of Health, "Charcot-Marie-Tooth Disease Fact Sheet," http://www.ninds.nih.gov/disorders/charcot_marie_tooth/detail_charcot_marie_tooth.htm, updated June 25, 2014, accessed December 5, 2014.

National Library of Medicine at the National Institutes of Health, "Noonan syndrome," http://ghr.nlm.nih.gov/condition/noonan-syndrome, updated March 2011, accessed December 5, 2014.

Mayo Clinic, "Sudden death in young people: Heart problems often blamed—Mayo Clinic," http://www. mayoclinic.org/diseases-conditions/sudden-cardiac-arrest/in-depth/sudden-death/art-20047571, updated April 14, 2014, accessed December 5, 2014.

University of California, San Francisco, "Long QT syndrome (LQTS)," https://cardiology.ucsf.edu/care/clinical/inhere/arrhythmia/qt.html, accessed December 5, 2014.

As used in this prospectus:

References to OMIM refer to Johns Hopkins University, "OMIM Entry Statistics," http://www.omim.org/statistics/entry, updated December 4, 2014, accessed December 5, 2014.

References to UnitedHealth Group, Inc. refer to UnitedHealth Group, Inc., "Personalized Medicine: Trends and prospects for the new science of genetic testing and molecular diagnostics," Working Paper 7, March 2012.

References to genetests.org refer to GeneTests, "GeneTests-Home," https://www.genetests.org, updated December 5, 2014, accessed December 5, 2014.

Our estimate of the size of the U.S. market for hereditary cancer tests is based on the annualized fourth quarter 2014 revenue for hereditary cancer tests as reported by Myriad Genetics, Inc. in its Annual Report on Form 10-K for the fiscal year ended June 30, 2014 and management estimates.

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Invitae Corporation

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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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Invitae Corporation
Notes to consolidated financial statements (Continued)

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

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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 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 Judicial 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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Invitae Corporation
Notes to consolidated financial statements (Continued)

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

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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.

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

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Invitae Corporation
Notes to consolidated financial statements (Continued)

when declared by the Board of Directors, subject to the prior rights of holders of all series of convertible preferred stock outstanding.

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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Invitae Corporation
Notes to consolidated financial statements (Continued)

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.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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.

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

         
   

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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.

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  
   

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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%  
   

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.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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.

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.

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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  
   

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

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Invitae Corporation
Notes to consolidated financial statements (Continued)

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

  September 30,
2014

  Pro forma
stockholders'
equity as of
September 30, 2014

 
   
 
   
  (Unaudited)
  (Unaudited)
 

Assets

                   

Current assets:

                   

Cash and cash equivalents

  $ 43,070   $ 59,138        

Prepaid expenses and other current assets

    736     1,393        
             

Total current assets

    43,806     60,531        

Property and equipment, net

    8,164     10,795        

Restricted cash

    120     150        

Other assets

    1,013     1,671        
             

Total assets

  $ 53,103   $ 73,147        
             

Liabilities, convertible preferred stock, and stockholders' deficit

                   

Current liabilities:

                   

Accounts payable

  $ 498   $ 3,450        

Accrued liabilities

    886     2,754        

Capital lease obligation, current portion

    845     800        
             

Total current liabilities

    2,229     7,004        

Capital lease obligation, net of current portion

    1,156     577        

Other long term liabilities

    393     408        

Liabilities related to early exercise of stock options

    31     18        
             

Total liabilities

    3,809     8,007        
             

Commitments and contingencies

                   

Convertible preferred stock; $0.0001 par value, 81,131,537 and 116,131,524 shares authorized as of December 31, 2013 and September 30, 2014 (unaudited), respectively; 81,131,524 and 105,631,524 shares issued and outstanding as of December 31, 2013 and September 30, 2014 (unaudited), respectively; no shares authorized, issued and outstanding, pro forma (unaudited); aggregate liquidation value of $87,002 and $136,012 as of December 31, 2013 and September 30, 2014 (unaudited), respectively

   
86,574
   
133,907
 
$

 

Stockholders' deficit:

                   

Common stock, $0.0001 par value; 98,131,537 and 135,131,524 shares authorized as of December 31, 2013 and September 30, 2014 (unaudited), respectively; 4,396,033 and 5,383,469 shares issued and outstanding as of December 31, 2013 and September 30, 2014 (unaudited), respectively; 111,014,993 shares issued and outstanding, pro forma (unaudited)

            11  

Additional paid-in capital

    408     1,108     135,004  

Accumulated deficit

    (37,688 )   (69,875 )   (69,875 )
       

Total stockholders' (deficit) equity

    (37,280 )   (68,767 ) $ 65,140  
       

Total liabilities, convertible preferred stock, and stockholders' deficit

  $ 53,103   $ 73,147        
         

   

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)

   
 
  Nine months ended September 30,  
(In thousands, except share and per share amounts)
  2013
  2014
 
   

Revenue

  $ 60   $ 729  

Costs and operating expenses:

             

Cost of revenue

    441     3,263  

Research and development

    10,621     15,600  

Selling and marketing

    1,599     5,823  

General and administrative

    4,037     8,112  
       

Total costs and operating expenses

    16,698     32,798  
       

Loss from operations

    (16,638 )   (32,069 )

Other expense, net

    (25 )   (69 )

Interest expense

    (44 )   (49 )
       

Net loss and comprehensive loss

  $ (16,707 ) $ (32,187 )
       

Net loss attributable to common stockholders

  $ (16,858 ) $ (32,187 )
       

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

  $ (4.13 ) $ (6.54 )
       

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

    4,078,837     4,918,489  
       

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

        $ (0.36 )
             

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

          89,280,782  
   

   

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)

   
 
  Nine months ended
September 30,
 
(In thousands)
  2013
  2014
 
   

Cash flow from operating activities

             

Net loss

  $ (16,707 ) $ (32,187 )

Adjustments to reconcile net loss to net cash used in operating activities:

             

Depreciation and amortization

    603     1,574  

Stock-based compensation

    165     538  

Loss on disposal of property and equipment

        33  

Changes in operating assets and liabilities:

             

Prepaid expenses and other current assets

    (256 )   (657 )

Other assets

    (3 )   (658 )

Accounts payable

    (141 )   1,454  

Accrued liabilities and other liabilities

    911     1,799  
       

Net cash used in operating activities

    (15,428 )   (28,104 )
       

Cash flows from investing activities

             

Purchases of property and equipment

    (3,838 )   (2,655 )

Change in restricted cash

    (60 )   (30 )
       

Net cash used in investing activities

    (3,898 )   (2,685 )
       

Cash flows from financing activities

             

Capital lease principal payment

    (480 )   (625 )

Proceeds from issuance of common stock upon exercise of stock options

    33     149  

Proceeds from issuance of convertible preferred stock, net of issuance costs

    9,933     47,333  
       

Net cash provided by financing activities

    9,486     46,857  
       

Net increase (decrease) in cash and cash equivalents

    (9,840 )   16,068  

Cash and cash equivalents at beginning of period

    21,801     43,070  
       

Cash and cash equivalents at end of period

  $ 11,961   $ 59,138  
       

Supplemental cash flow information:

             

Interest paid

  $ 44   $ 49  
       

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

  $ 256   $ 1,583  
   

   

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 September 30, 2014, and the consolidated statements of operations and comprehensive loss and cash flows for the nine months ended September 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 September 30, 2014 and its results of operations and cash flows for the nine months ended September 30, 2013 and 2014. The financial data and the other financial information contained in these notes to the consolidated financial statements related to the nine-month periods are also unaudited. The results of operations for the nine months ended September 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 September 30, 2014 presents the Company's stockholders' equity as though all of the Company's convertible preferred stock outstanding had automatically converted into 105,631,524 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 nine months ended September 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 12% of the Company's revenue for the nine months ended September 30, 2014 and 63% of the Company's revenue for the nine months ended September 30, 2013. For the nine months ended September 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 nine months ended September 30, 2013 and 2014, the Company capitalized $175,000 and $625,000, respectively, of software development costs. Such costs are included within property and equipment on the balance sheets.

Deferred offering costs

Deferred offering costs, which primarily consist of direct incremental legal and accounting fees relating to the IPO are capitalized. The deferred offering costs will be offset against IPO proceeds upon the consummation of the offering. In the event the offering is terminated, deferred offering costs will be expensed. As of September 30, 2014, the Company capitalized $468,000 of deferred offering costs in other assets on the consolidated balance sheet.

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.

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

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 nine months ended September 30, 2013 and 2014, 373,237 and 180,969 shares subject to repurchase, respectively, are excluded from basic loss per share calculation.

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.

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

2.     Balance sheet components

Property and equipment, net

Property and equipment, net, consists of the following (in thousands):

   
 
  December 31,
2013

  September 30,
2014

 
   

Leasehold improvements

  $ 1,527   $ 1,914  

Laboratory equipment

    3,567     4,214  

Equipment under capital lease

    3,735     3,735  

Computer equipment

    120     816  

Software

    18     643  

Furniture and fixtures

    21     72  

Automobiles

    16      

Construction-in-process

    410     2,163  
       

Total property and equipment, gross

    9,414     13,557  

Accumulated depreciation and amortization

    (1,250 )   (2,762 )
       

Total property and equipment, net

  $ 8,164   $ 10,795  
   

Depreciation and amortization expense for the nine months ended September 30, 2013 and 2014 was $603,000 and $1.6 million, respectively.

Accrued liabilities

Accrued liabilities consist of the following (in thousands):

   
 
  December 31,
2013

  September 30,
2014

 
   

Accrued compensation and related expenses

  $ 279   $ 1,333  

Accrued professional services

    201     904  

Accrued costs for construction-in-process

    168      

Other

    238     517  
       

Total accrued liabilities

  $ 886   $ 2,754  
   

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

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

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 September 30, 2014, the Company had $33.2 million and $15.2 million in money market funds that are included in cash and cash equivalents and restricted cash 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 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 Judicial 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.

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

5.     Convertible preferred stock

Convertible preferred stock as of September 30, 2014 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

    31,112,750     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  

Series F

    35,000,000     2.00     24,500,000     49,000     47,333  
                 

Balance at September 30, 2014

    116,131,524           105,641,524   $ 136,012   $ 133,907  
   

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 proceeds of $47.3 million, net of issuance costs of $1.7 million.

The rights, preferences and privileges of the Series F convertible preferred stock are as follows:

Dividends

The holders of the outstanding shares of Series F 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 $0.16 per share per annum, respectively. Such dividends are payable in preference to any dividends on common stock declared by the Board of Directors. No dividends have been declared to date.

Conversion rights

Each share of Series F 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.

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 as well as the holders of a majority of the outstanding shares of each series of 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 per share that is approved by a majority of

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

the preferred stock holders or at a price per share of at least $2.00 (subject to adjustment in the event of any stock split), in each instance where 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 Series F 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 but pari passu with a distribution of preferential amounts to the holders of the other series of convertible preferred stock, an amount equal to the per share issue price of $2.00 per share for the Series F convertible preferred stock, plus all declared and unpaid dividends on such shares. If available assets are insufficient to pay the full liquidation preference for all series of convertible preferred stock, 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 such full liquidation preference, all remaining assets available for distribution will be distributed ratably among the holders of the common stock.

6.     Stock incentive plan

2010 Equity incentive plan

The following table summarizes option activity under the 2010 Plan and related information during the nine months ended September 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  

Additional shares authorized

    2,000,000                      

Repurchase of unvested early exercised shares

    11,757                      

Granted

    (3,350,500 )   3,350,500     0.58              

Cancelled

    1,291,834     (1,291,834 )   0.32              

Exercised

        (853,695 )   0.18              
                             

Balances at September 30, 2014

    5,192,215     8,243,351   $ 0.40     8.56   $ 7,460  
                             

Options exercisable at September 30, 2014

          2,242,231   $ 0.23     7.45   $ 2,404  
                               

Options vested and expected to vest at September 30, 2014

          8,046,900   $ 0.39     8.55   $ 7,301  
   

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

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 $0.29 and $0.50 per share in the nine months ended September 30, 2013 and 2014, respectively.

The fair value of options to purchase common stock vested was $154,000 and $360,000 in the nine months ended September 30, 2013 and 2014, respectively.

The intrinsic value of options to purchase common stock exercised was $18,000 and $369,000 in the nine months ended September 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 September 30, 2014, there were 326,465 and 180,969 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 September 30, 2014, the Company recorded $31,000 and $18,000, respectively, as liabilities associated with shares issued with repurchase rights.

Stock-based compensation

Stock-based compensation expense recognized was as follows (in thousands):

   
 
  Nine months
ended
September 30,
 
 
  2013
  2014
 
   

Cost of revenue

  $ 7   $ 47  

Research and development

    106     231  

Selling and marketing

    26     90  

General and administrative

    26     170  
       

Total stock-based compensation expense

  $ 165   $ 538  
   

As of September 30, 2014, the Company had $2.1 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over an estimated weighted-average period of 3.1 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:

   
 
  Nine months ended
September 30,
 
 
  2013
  2014
 
   

Expected term (in years)

    6.03     6.03  

Expected volatility

    89.09–94.52%     85.68–86.63%  

Risk-free interest rate

    0.99–1.97%     1.75–1.91%  

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 9.51 to 9.85 years as of September 30, 2013 and 8.51 to 9.63 years as of September 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 89.09% and 85.27% as of September 30, 2013 and 2014, respectively.

7.     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 nine months ended September 30, 2013 and 2014 (in thousands, except share and per share amounts):

   
 
  Nine months ended
September 30,
 
 
  2013
  2014
 
   

Net loss

  $ (16,707 ) $ (32,187 )

Less: dividend on convertible preferred stocks

    (151 )    
       

Net loss attributable to common stockholders

  $ (16,858 ) $ (32,187 )
       

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

    4,078,837     4,918,489  
       

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

  $ (4.13 ) $ (6.54 )
   

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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:

   
 
  Nine months ended
September 30,
 
 
  2013
  2014
 
   

Shares of common stock subject to outstanding options

    6,623,380     8,243,351  

Shares of common stock subject to conversion from preferred stock

    54,987,747     105,631,524  

Shares of common stock subject to unvested early exercise of outstanding options subject to repurchase

    373,237     180,969  
       

Total shares of common stock equivalents

    61,984,364     114,055,844  
   

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 nine months ended September 30, 2014 (in thousands, except share and per share amounts):

   
 
  Nine months
ended
September 30,
2014

 
   

Net loss

  $ (32,187 )
       

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

    4,918,489  

Pro forma adjustments to reflect assumed conversion of convertible preferred stock

    84,362,293  
       

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

    89,280,782  
       

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

  $ (0.36 )
   

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Invitae Corporation
Notes to condensed consolidated financial statements (Continued)

8.     Geographic information

Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for the nine months ended September 30, 2013 and 2014 (in thousands):

   
 
  Nine months
ended
September 30
 
(In thousands)
  2013
  2014
 
   

United States

  $ 19   $ 467  

Canada

    2     156  

Israel

    38     89  

Rest of world

    1     17  
       

Revenue

  $ 60   $ 729  
   

9.     Subsequent events

Amendment to Certificate of Incorporation

In October 2014, the Company filed an amended and restated certificate of incorporation to increase the number of authorized shares of common stock to a new total of 160,131,524 shares and increase the number of authorized shares of preferred stock to a new total of 141,131,524 shares, comprised of 11,693,179 shares of Series A convertible preferred stock, 4,181,818 shares of Series B convertible preferred stock, 31,112,750 shares of Series C convertible preferred stock, 8,00,000 shares of Series D convertible preferred stock, 26,143,777 shares of Series E convertible preferred stock, and 60,000,000 shares of Series F convertible preferred stock.

Series F convertible preferred stock

In October 2014, the Company issued an additional 35,500,000 shares of Series F convertible preferred stock at a price of $2.00 per share for aggregate proceeds of $68.5 million, net issuance costs of $2.5 million.

New Lease

In November 2014, the Company leased additional space in San Francisco, California. The lease expires in April 2017 and aggregate future minimum lease payments for this facility are approximately $1.7 million.

New Capital Lease

In December 2014, the Company entered into a capital lease agreement for laboratory equipment. The term of the lease is 36 months and the minimum lease payments due under the agreement are $3.1 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

  $ 10,023  

Financial Industry Regulatory Authority filing fee

    13,438  

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 since December 31, 2011:

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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Table of Contents

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 14,753,621 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 1,740,304 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 $291,274.

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.

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.

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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 9th day of January, 2015.

    INVITAE CORPORATION

 

 

By:

 

/s/ RANDAL W. SCOTT

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
 

 

 

 

 

 
/s/ RANDAL W. SCOTT

Randal W. Scott, Ph.D.
  Chairman of the Board of Directors and Chief Executive Officer
(Principal Executive Officer)
  January 9, 2015

/s/ LEE BENDEKGEY

Lee Bendekgey

 

Chief Financial Officer, General Counsel and Secretary
(Principal Financial Officer)

 

January 9, 2015

/s/ PATRICIA E. DUMOND

Patricia E. Dumond

 

Vice President, Finance
(Principal Accounting Officer)

 

January 9, 2015

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Table of Contents

 
Name
  Title
  Date
 

 

 

 

 

 
/s/ SEAN E. GEORGE

Sean E. George, Ph.D.
  President, Chief Operating Officer and Director   January 9, 2015

/s/ ERIC AGUIAR

Eric Aguiar, M.D.

 

Director

 

January 9, 2015

/s/ GEOFFREY S. CROUSE

Geoffrey S. Crouse

 

Director

 

January 9, 2015

 

 

 

 

 

 

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Table of Contents


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 Notice of Stock Option Grant and Non-Qualified Stock Option Agreement for awards granted under the 2015 Stock Incentive Plan.

 

10.7

#

Form of Notice of Restricted Stock Award and 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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Table of Contents

 
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, as amended.

 

10.13

 

Sublease, dated December 6, 2013, by and between Invitae Corporation and Sutter West Bay Hospitals.

 

10.14

 

Lease, dated October 31, 2012, by and between Invitae Corporation and 278 University Investors, LLC.

 

10.15

 

Sublease, dated November 21, 2014, by and between Invitae Corporation and InMobi Inc.

 

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.

†      Confidential treatment requested.

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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

 

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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 Dividends The 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

 

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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 Dividends The 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 Dividends The 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

 

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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 Dividends The 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

 

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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 Dividends The 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

 

6



 

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

 

7



 

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 Escrow In 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

 

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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:

 

CP 2  = CP 1 * (A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(a)                                  “CP 2 ” 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)                                  “CP 1 ” 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 CP 1  (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP 1 ); 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;

 

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(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

 

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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

 

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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,

 

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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,

 

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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

 

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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.

 

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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

 

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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

 




Exhibit 3.1(b)

 

CERTIFICATE OF AMENDMENT

OF

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

INVITAE CORPORATION

 

(Pursuant to Section 242 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, that this corporation was originally incorporated (as Locus Development, Inc.) pursuant to the General Corporation Law on January 13, 2010, and that this corporation most recently filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on October 7, 2014.

 

2.              That the Board of Directors of this corporation duly adopted resolutions proposing to amend the Amended and Restated Certificate of Incorporation of this corporation, declaring said amendment 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 resolutions setting forth the proposed amendment are as follows:

 

RESOLVED , that the first paragraph of Article Fourth of the Amended and Restated Certificate of Incorporation as presently in effect is amended to read in its entirety as follows:

 

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 ”).  At the time this Certificate of Amendment of Amended and Restated Certificate of Incorporation shall become effective, every [ XXXXXXX ( XXX )] shares of the Common Stock issued and outstanding immediately prior to such time shall be, and hereby are, combined and reclassified into one (1) fully paid and nonassessable share of Common Stock (the “ Stock Combination ”).  Each outstanding stock certificate of the Corporation which, immediately prior to the time this Certificate of

 



 

Amendment of Amended and Restated Certificate of Incorporation shall become effective, represents one or more shares of Common Stock shall thereafter be deemed to represent the appropriate number of shares of Common Stock, taking into account the Stock Combination, until such old stock certificate is exchanged for a new stock certificate, or the shares are placed in book position, reflecting the appropriate number of shares resulting from the Stock Combination.  For purposes of clarity, the effect of the Stock Combination shall be that each share of Common Stock outstanding immediately prior to the time this Certificate of Amendment of Amended and Restated Certificate of Incorporation shall become effective shall become, following the Stock Combination, [ XXXXXXX ( XXX )] of a share of Common Stock; however, no fractional share shall be issued as a result of the Stock Combination.  All shares of Common Stock held by a holder shall be aggregated for purposes of determining whether the Stock Combination would result in the issuance of any fractional share.  If the Stock Combination would result in the issuance of a fraction of a share of Common Stock, the Corporation shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of the Stock Combination (as determined in good faith by the Corporation’s Board of Directors).”

 

RESOLVED FURTHER , that the Amended and Restated Certificate of Incorporation as presently in effect is amended to add a new Article Thirteenth reading in its entirety as follows:

 

THIRTEENTH:   From and after such time as the Common Stock is first a “covered security” pursuant to Section 18(b)(1) of the Securities Act of 1933, as amended, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum (unless the Corporation consents in writing to the selection of an alternative forum) for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article Thirteenth .”

 

RESOLVED FURTHER , that all other provisions of the Amended and Restated Certificate of Incorporation as presently in effect remain in full force and effect.

 

3.              That the foregoing amendments were 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 Certificate of Amendment of Amended and Restated Certificate of Incorporation, which amends the provisions of this corporation’s Amended and Restated Certificate of Incorporation, has been duly adopted in accordance with Section 242 of the General Corporation Law.

 

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IN WITNESS WHEREOF , this Certificate of Amendment of Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this     day of                 , 2015.

 

 

 

By:

 

 

 

Randal W. Scott

 

 

Chief Executive Officer

 

3




Exhibit 3.1(c)

 

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INVITAE CORPORATION

 

Invitae Corporation, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

 

FIRST :                                                       The name of the corporation is Invitae Corporation

 

SECOND :                                        The original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on January 13, 2010, under its former name “Locus Development, Inc.”

 

THIRD :                                                   The Certificate of Incorporation of the corporation was most recently amended and restated pursuant to an Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on October 7, 2014, and is hereby further amended and restated pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware.

 

FOURTH :                                      The Certificate of Incorporation of the corporation shall be amended and restated to read in full as follows:

 

ARTICLE I

 

The name of the Corporation is Invitae Corporation (the “Corporation” ).

 

ARTICLE II

 

The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

 

ARTICLE III

 

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (the “DGCL” ).

 

ARTICLE IV

 

A.                                     Classes of Stock .  The total number of shares of all classes of capital stock that the Corporation shall have authority to issue is Four Hundred Twenty Million ( 420,000,000 ), of which Four Hundred Million ( 400,000,000 ) shares shall be Common Stock, $0.0001 par value per share (the “Common Stock” ), and of which Twenty Million ( 20,000,000 ) shares shall be

 



 

Preferred Stock, $0.0001 par value per share (the “ Preferred Stock ”). (1)  The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such Preferred Stock holders is required pursuant to the provisions established by the Board of Directors of the Corporation (the “Board of Directors” ) in the resolution or resolutions providing for the issue of such Preferred Stock, and if such holders of such Preferred Stock are so entitled to vote thereon, then, except as may otherwise be set forth in the certificate of incorporation of the Corporation, the only stockholder approval required shall be the affirmative vote of a majority of the voting power of the Common Stock and the Preferred Stock so entitled to vote, voting together as a single class.

 

B.                                     Preferred Stock . The Preferred Stock may be issued from time to time in one or more series, as determined by the Board of Directors. The Board of Directors is expressly authorized to provide for the issue, in one or more series, of all or any of the remaining shares of Preferred Stock and, in the resolution or resolutions providing for such issue, to establish for each such series the number of its shares, the voting powers, full or limited, of the shares of such series, or that such shares shall have no voting powers, and the designations, preferences and relative, participating, optional or other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof. The Board of Directors is also expressly authorized (unless forbidden in the resolution or resolutions providing for such issue) to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

 

C.                                     Common Stock .

 

1.                                       Relative Rights of Preferred Stock and Common Stock. All preferences, voting powers, relative, participating, optional or other special rights and privileges, and qualifications, limitations, or restrictions of the Common Stock are expressly made subject and subordinate to those that may be fixed with respect to any shares of the Preferred Stock.

 

2.                                       Voting Rights. Except as otherwise required by law or the certificate of incorporation of the Corporation, each holder of Common Stock shall have one vote in respect of each share of stock held by such holder of record on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation.

 

3.                                       Dividends. Subject to the preferential rights of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property or in shares of capital stock.

 


(1)          The authorized share numbers reflected are post-split ( i.e. , after giving effect to the reverse split of Common Stock that will occur in advance of the Corporation’s initial public offering).

 

2



 

4.                                       Dissolution, Liquidation or Winding Up. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of the Preferred Stock, holders of Common Stock shall be entitled, unless otherwise provided by law or the certificate of incorporation of the Corporation, to receive all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively.

 

ARTICLE V

 

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware:

 

A.                                     The Board of Directors is expressly authorized to adopt, amend or repeal the bylaws of the Corporation, without any action on the part of the stockholders, by the vote of at least a majority of the directors of the Corporation then in office. In addition to any vote of the holders of any class or series of stock of the Corporation required by law or the certificate of incorporation of the Corporation, the bylaws may also be adopted, amended or repealed by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares of the capital stock of the Corporation entitled to vote in the election of directors, voting as one class; provided, however, that the affirmative vote of the holders representing only a majority of the voting power of the shares of the capital stock of the Corporation entitled to vote in the election of directors, voting as one class, shall be required if such adoption, amendment or repeal of the bylaws has been previously approved by the affirmative vote of at least two-thirds (2/3) of the directors of the Corporation then in office.

 

B.                                     Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide.

 

C.                                     The books of the Corporation may be kept at such place within or without the State of Delaware as the bylaws of the Corporation may provide or as may be designated from time to time by the Board of Directors.

 

ARTICLE VI

 

A.                                     The business and affairs of the Corporation shall be managed by a Board of Directors. The authorized number of directors of the Corporation shall be fixed in the manner provided in the bylaws of the Corporation. Other than for those directors elected by the holders of any series of Preferred Stock, which shall be as provided for or fixed pursuant to the provisions of Article IV, Paragraph B hereof, each director shall serve until his or her successor shall be duly elected and qualified or until his or her earlier resignation, removal from office, death or incapacity.

 

B.                                     Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by a majority vote of

 

3



 

the directors then in office, although less than a quorum, or by a sole remaining director. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Directors chosen pursuant to any of the foregoing provisions shall hold office until their successors are duly elected and qualified or until their earlier resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, or by the certificate of incorporation or the bylaws of the corporation, may exercise the powers of the full Board of Directors until the vacancy is filled.

 

ARTICLE VII

 

A.                                     No action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.

 

B.                                     Special meetings of the stockholders of the Corporation may be called only by the Chairman of the Board of Directors or the Chief Executive Officer of the Corporation or by a resolution adopted by the affirmative vote of a majority of the Board of Directors, and any power of stockholders to call a special meeting of stockholders is specifically denied.

 

C.                                     Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner and to the extent provided in the bylaws of the Corporation.

 

D.                                     Unless the Corporation consents 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 (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VII, Paragraph D.

 

ARTICLE VIII

 

A.                                     Limitation on Liability . To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended (including, but not limited to Section 102(b)(7) of the DGCL), 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 DGCL hereafter is amended to further eliminate or limit the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended DGCL. Any repeal or modification of this paragraph by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.

 

4



 

B.                                     Indemnification . Each person who is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, employee benefit plan or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified and advanced expenses by the Corporation, in accordance with the bylaws of the Corporation, to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), or any other applicable laws as presently or hereinafter in effect. The right to indemnification and advancement of expenses hereunder shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, provision of the certificate of incorporation or bylaws of the Corporation, agreement, vote of stockholders or disinterested directors or otherwise.

 

C.                                     Insurance . The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

 

D.                                     Repeal and Modification . Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification.

 

ARTICLE IX

 

The affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend in any respect or repeal this Article IX, Paragraph A of Article V, or Articles VI, VII or VIII.

 

[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF , the corporation has caused this certificate to be signed by its Chief Executive Officer this     th day of           , 2015.

 

 

INVITAE CORPORATION

 

 

 

 

 

By

 

 

 

Randal W. Scott, Chief Executive Officer

 




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                                S pecial 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.

 

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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);

 

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(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 Company as 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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Exhibit 3.2(b)

 

AMENDED AND RESTATED

 

B Y L A W S

 

OF

 

INVITAE CORPORATION

 

(a Delaware corporation)

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE 1 Offices

1

 

 

1.1

Registered Office

1

1.2

Other Offices

1

 

 

ARTICLE 2 Meeting of Stockholders

1

 

 

2.1

Place of Meeting

1

2.2

Annual Meeting

1

2.3

Special Meetings

2

2.4

Notice of Meetings

3

2.5

List of Stockholders

3

2.6

Organization and Conduct of Business

3

2.7

Quorum

3

2.8

Adjournments

4

2.9

Voting Rights

4

2.10

Majority Vote

4

2.11

Record Date for Stockholder Notice and Voting

4

2.12

Proxies

4

2.13

Inspectors of Election

5

 

 

 

ARTICLE 3 Directors

5

 

 

 

3.1

Number, Election, Tenure and Qualifications

5

3.2

Enlargement and Vacancies

7

3.3

Resignation and Removal

7

3.4

Powers

7

3.5

Chairman of the Board

7

3.6

Place of Meetings

7

3.7

Regular Meetings

8

3.8

Special Meetings

8

3.9

Quorum, Action at Meeting, Adjournments

8

3.10

Action Without Meeting

8

3.11

Telephone Meetings

8

3.12

Committees

8

3.13

Fees and Compensation of Directors

9

 

 

ARTICLE 4 Officers

9

 

 

4.1

Officers Designated

9

4.2

Election

9

4.3

Tenure

9

4.4

The Chief Executive Officer

10

4.5

The President

10

4.6

The Vice President

10

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

4.7

The Secretary

10

4.8

The Assistant Secretary

10

4.9

The Chief Financial Officer

11

4.10

The Treasurer and Assistant Treasurers

11

4.11

Bond

11

4.12

Delegation of Authority

11

 

 

ARTICLE 5 Notices

11

 

 

5.1

Delivery

11

5.2

Waiver of Notice

12

 

 

 

ARTICLE 6 Indemnification and Insurance

12

 

 

6.1

Indemnification of Officers and Directors

12

6.2

Indemnification of Others

13

6.3

Advance Payment

13

6.4

Right of Indemnitee to Bring Suit

14

6.5

Non-Exclusivity and Survival of Rights; Amendments

14

6.6

Insurance

14

6.7

Reliance

14

6.8

Severability

14

 

 

 

ARTICLE 7 Capital Stock

15

 

 

 

7.1

Certificates for Shares

15

7.2

Signatures on Certificates

15

7.3

Transfer of Stock

15

7.4

Registered Stockholders

16

7.5

Lost, Stolen or Destroyed Certificates

16

 

 

ARTICLE 8 General Provisions

16

 

 

8.1

Dividends

16

8.2

Checks

16

8.3

Corporate Seal

16

8.4

Execution of Corporate Contracts and Instruments

16

8.5

Representation of Shares of Other Corporations

17

 

 

ARTICLE 9 Amendments

17

 

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AMENDED AND RESTATED

 

B Y L A W S

 

OF

 

INVITAE CORPORATION

(a Delaware corporation)

 

ARTICLE 1

 

Offices

 

1.1                                Registered Office .  The registered office of the corporation shall be set forth in the certificate of incorporation of the corporation.

 

1.2                                Other Offices .  The corporation may also have offices at such other places, either within or without the State of Delaware, as the board of directors of the corporation (the “ Board of Directors ”) may from time to time designate, or the business of the corporation may require.

 

ARTICLE 2

 

Meeting of Stockholders

 

2.1                                Place of Meeting .  Meetings of stockholders may be held at such place, either within or without the State of Delaware, as may be designated by or in the manner provided in these bylaws, or, if not so designated, at the principal executive offices of the corporation.  The Board of Directors may, in its sole discretion, (a) determine that a meeting of stockholders shall not be held at any place, but may instead be held solely, or (b) permit participation by stockholders at such meeting, by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “ DGCL ”).

 

2.2                                Annual Meeting .  Annual meetings of stockholders shall be held each year at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting.  At each such annual meeting, the stockholders shall elect the number of directors equal to the number of directors of the class whose term expires at such meeting (or, if fewer, the number of directors properly nominated and qualified for election) to hold office until the third succeeding annual meeting of stockholders after their election.  The stockholders shall also transact such other business as may properly be brought before the meeting.

 

To be properly brought before the annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder of record.  A motion related to business proposed to be brought before any stockholders’ meeting may be made by any stockholder entitled to vote if the business proposed is otherwise proper to be brought before the meeting. However, any such stockholder may propose business to be brought

 



 

before a meeting only if such stockholder has given timely notice to the Secretary of the corporation in proper written form of the stockholder’s intent to propose such business. To be timely, the stockholder’s notice must be delivered by a nationally recognized courier service or mailed by first class United States mail, postage or delivery charges prepaid, and received at the principal executive offices of the corporation addressed to the attention of the Secretary of the corporation not more than one hundred twenty (120) days nor less than ninety (90) days in advance of the anniversary of the date of the corporation’s proxy statement provided in connection with the previous year’s annual meeting of stockholders; provided, however , that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is more than thirty (30) days before or after the anniversary date of the previous year’s annual meeting, notice by the stockholder must be received by the Secretary of the corporation not later than the close of business on the later of (x) the ninetieth (90th) day prior to such annual meeting and (y) the tenth (10th) day following the day on which public announcement of the date of such meeting is first made.  For the purposes of these bylaws, “ public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission.  In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.  A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws of the corporation, the language of the proposed amendment), and the reasons for conducting such business at the annual meeting; (ii) the name and record address of the stockholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made; (iii) the class, series and number of shares of the corporation that are owned beneficially and of record by the stockholder and such beneficial owner; (iv) any material interest of the stockholder in such business; and (v) any other information that is required to be provided by the stockholder pursuant to Section 14 of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (collectively, the “ 1934 Act ”) in such stockholder’s capacity as a proponent of a stockholder proposal.

 

Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section; provided , however , that nothing in this Section shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting.

 

The Chairman of the Board (or such other person presiding at the meeting in accordance with these bylaws) shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

 

2.3                                Special Meetings .  Special meetings of the stockholders may be called for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, by the Secretary only at the request of the Chairman of the Board, the Chief Executive Officer or

 

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by a resolution duly adopted by the affirmative vote of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting.  Business transacted at any special meeting shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.

 

2.4                                Notice of Meetings .  Except as otherwise provided by law or these bylaws, written notice of each meeting of stockholders, annual or special, stating the place, if any, date and time 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, and, in the case of a special meeting, the purpose or purposes for which such special meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.

 

2.5                                List of Stockholders .  The officer in charge of the stock ledger of the corporation or the transfer agent shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  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 (10) days prior to the meeting, (a) 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 (b) during ordinary business hours, at the principal place of business of the corporation.  If the meeting is to be held at a place, then the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected 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 gain access to such list shall be provided with the notice of the meeting.

 

2.6                                Organization and Conduct of Business .  The Chairman of the Board or, in his or her absence, the Chief Executive Officer or President of the corporation or, in their absence, such person as the Board of Directors may have designated or, in the absence of such a person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting.  In the absence of the Secretary of the corporation, the secretary of the meeting shall be such person as the chairman of the meeting appoints.

 

The chairman 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 discussion as seems to him or her in order.

 

2.7                                Quorum .  Except where otherwise provided by law or the certificate of incorporation of the corporation or these bylaws, the holders of a majority of the voting power of the capital stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders.

 

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2.8                                Adjournments .  If a quorum is not present or represented at any meeting of stockholders, a majority of the stockholders present in person or represented by proxy at the meeting and entitled to vote, though less than a quorum, or by any officer entitled to preside at such meeting, shall be entitled to adjourn such meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented.  When a meeting is adjourned to another place, date or time, notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however , that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, if any, date, time and means of remote communications, if any, of the adjourned meeting shall be given in conformity herewith.  At any adjourned meeting, any business may be transacted that might have been transacted at the original meeting.

 

2.9                                Voting Rights .  Unless otherwise provided in the certificate of incorporation of the corporation, each stockholder shall at every meeting of the stockholders be entitled to one vote for each share of the capital stock having voting power held by such stockholder.

 

2.10                         Majority Vote .  When a quorum is present at any meeting, the vote of the holders of a majority of the voting power of the capital stock and entitled to vote present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of an applicable statute or of the certificate of incorporation of the corporation or of these bylaws, a different vote is required in which case such express provision shall govern and control the decision of such question.

 

2.11                         Record Date for Stockholder Notice and Voting .  For purposes of determining the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any right in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any other action to which the record date relates.  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 of Directors may fix a new record date for the adjourned meeting.  If the Board of Directors does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.  The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.

 

2.12                         Proxies .  Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. All proxies must be filed with the Secretary of the corporation at the beginning of each meeting in order to be counted in any vote at the meeting.  Subject to the limitation set forth in

 

4



 

the last clause of the first sentence of this Section 2.12, a duly executed proxy that does not state that it is irrevocable shall continue in full force and effect unless (a) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy, or (b) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted.

 

2.13                         Inspectors of Election .  The corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof.  The corporation may designate one or more persons to act as alternate inspectors to replace any inspector who fails to act.  If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.  Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability.

 

ARTICLE 3

 

Directors

 

3.1                                Number, Election, Tenure and Qualifications .  The number of directors that shall constitute the entire Board of Directors shall be fixed from time to time by resolution adopted by a majority of the directors of the corporation then in office.  No decrease in the number of authorized directors shall have the effect of removing any director before that director’s term of office expires.

 

The Board of Directors shall be divided into three classes, each class to serve for a term of three (3) years and to be as nearly equal in number as possible.  Class I shall be comprised of directors who shall serve until the first annual meeting of stockholders following the effective date of these bylaws.  Class II shall be comprised of directors who shall serve until the second annual meeting of stockholders following the effective date of these bylaws.  Class III shall be comprised of directors who shall serve until the third annual meeting of stockholders following the effective date of these bylaws.  The Board of Directors is authorized, upon the initial effectiveness of the classification of the Board of Directors, to assign members of the Board of Directors already in office among the various classes as determined by the Board of Directors.

 

At each annual meeting of the stockholders, directors shall be elected for that class of directors whose terms are then expiring, except as otherwise provided in Section 3.2, and each director so elected shall hold office until such director’s successor is duly elected and qualified or until such director’s earlier resignation, removal, death or incapacity.

 

If a majority of the votes cast for a director are marked “against” or “withheld” in an uncontested election, the director shall promptly tender his or her irrevocable resignation for the Board of Directors’ consideration.  If such director’s resignation is accepted by the Board, then the Board of Directors, in its sole discretion, may fill the resulting vacancy in accordance with

 

5



 

the provisions of Section 3.2 or may decrease the size of the Board of Directors in accordance with the provisions of Section 3.1.

 

Subject to the rights of holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, nominations of persons for election to the Board of Directors must be (a) made by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) made by any stockholder of record of the corporation entitled to vote for the election of directors at the applicable meeting who complies with the notice procedures set forth in this Section 3.2.  Directors need not be stockholders.  Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation.  To be timely, a stockholder’s notice shall be delivered by a nationally recognized courier service or mailed by first class United States mail, postage or delivery charges prepaid, and received at the principal executive offices of the corporation addressed to the attention of the Secretary of the corporation  (i) in the case of an annual meeting of stockholders, not more than one hundred twenty (120) days nor less than ninety (90) days in advance of the anniversary of the date of the corporation’s proxy statement provided in connection with the previous year’s annual meeting of stockholders; provided, however , that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date more than thirty (30) days before or after the anniversary date of the previous year’s annual meeting, notice by the stockholder must be received by the Secretary of the corporation not later than the close of business on the later of (A) the ninetieth (90th) day prior to such annual meeting and (B) the tenth (10th) day following the day on which public announcement of the date of such meeting is first made, and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made.  Such stockholder’s notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class, series and number of shares of capital stock of the corporation that are owned beneficially by the person, (iv)  any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the 1934 Act and the rules and regulations promulgated thereunder and (v) the nominee’s written consent to serve, if elected, and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class, series and number of shares of capital stock of the corporation that are owned beneficially by the stockholder, and (iii) a description of all arrangements or understandings between such stockholder and each person the stockholder proposes for election or re-election as a director pursuant to which such proposed nomination is being made.  The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation.  No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth herein.

 

In connection with any annual meeting of the stockholders (or, if and as applicable, any special meeting of the stockholders), the Chairman of the Board (or such other person presiding at such meeting in accordance with these bylaws) shall, if the facts warrant, determine and

 

6



 

declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.

 

3.2                                Enlargement and Vacancies .  Except as otherwise provided by the certificate of incorporation, subject to the rights of the holders of any series of preferred stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. If there are no directors in office, then an election of directors may be held in the manner provided by statute.  Directors chosen pursuant to any of the foregoing provisions shall hold office until the next annual election at which the term of the class to which he or she has been elected expires and until such director’s successor is duly elected and qualified or until such director’s earlier resignation or removal.  In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, or by the certificate of incorporation or the bylaws of the corporation, may exercise the powers of the full Board of Directors until the vacancy is filled.

 

3.3                                Resignation and Removal .  Any director may resign at any time upon written notice to the corporation at its principal place of business addressed to the attention of the Chief Executive Officer, the Secretary, the Chairman of the Board or the Chairman of the Nominating and Corporate Governance Committee of the Board of Directors, who shall in turn notify the full Board of Directors (although failure to provide such notification to the full Board of Directors shall not impact the effectiveness of such resignation).  Such resignation shall be effective upon receipt of such notice by one of the individuals designated above unless the notice specifies such resignation to be effective at some other time or upon the happening of some other event.  Any director or the entire Board of Directors may be removed, but only for cause, by the holders of a majority of the voting power of the capital stock issued and outstanding then entitled to vote at an election of directors.

 

3.4                                Powers .  The business of the corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation of the corporation or by these bylaws directed or required to be exercised or done by the stockholders.

 

3.5                                Chairman of the Board .  The directors shall elect a Chairman of the Board and may elect a Vice Chair of the Board, each to hold such office until their successor is elected and qualified or until their earlier resignation or removal.  In the absence or disability of the Chairman of the Board, the Vice Chair of the Board, if one has been elected, or another director designated by the Board of Directors, shall perform the duties and exercise the powers of the Chairman of the Board.  The Chairman of the Board of the corporation shall if present preside at all meetings of the stockholders and the Board of Directors and shall have such other duties as may be vested in the Chairman of the Board by the Board of Directors.  The Vice Chair of the Board of the corporation shall have such duties as may be vested in the Vice Chair of the Board by the Board of Directors.

 

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3.6                                Place of Meetings .  The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware.

 

3.7                                Regular Meetings .  Regular meetings of the Board of Directors may be held without notice at such time and place as may be determined from time to time by the Board of Directors; provided, however , that any director who is absent when such a determination is made shall be given prompt notice of such determination.

 

3.8                                Special Meetings .  Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer, or by the written request of a majority of the directors then in office. Notice of the time and place, if any, of special meetings shall be delivered personally or by telephone to each director, or sent by first-class mail or commercial delivery service, facsimile transmission, or by electronic mail or other electronic means, charges prepaid, sent to such director’s business or home address as they appear upon the records of the corporation.  In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of holding of the meeting.  In case such notice is delivered personally or by telephone or by commercial delivery service, facsimile transmission, or electronic mail or other electronic means, it shall be so delivered at least twenty-four (24) hours prior to the time of the holding of the meeting.  A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.

 

3.9                                Quorum, Action at Meeting, Adjournments .  At all meetings of the Board of Directors, a majority of directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, as it presently exists or may hereafter be amended, or by the bylaws of the corporation.  If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

 

3.10                         Action Without Meeting .  Unless otherwise restricted by the certificate of incorporation of the corporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors 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 of Directors or committee.

 

3.11                         Telephone Meetings .  Unless otherwise restricted by the certificate of incorporation of the corporation or these bylaws, any member of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or of any committee, as the case may be, by means of conference telephone or by any form of 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.

 

3.12                         Committees .  The Board of Directors may, by resolution, designate one or more committees, each committee to consist of one or more of the directors of the corporation.  The

 

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Board of Directors 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 present at any meeting and not disqualified from voting, whether or not the member or members present constitute a quorum, may unanimously appoint another member of the Board of Directors 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 of Directors, shall have and may exercise all of the lawfully delegated powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.  Each committee shall keep regular minutes of its meetings and make such reports to the Board of Directors as the Board of Directors may request or the charter of such committee may then require.  Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these bylaws for the conduct of its business by the Board of Directors.

 

3.13                         Fees and Compensation of Directors .  The Board of Directors shall have the authority to fix the compensation of directors.

 

ARTICLE 4

 

Officers

 

4.1                                Officers Designated .  The officers of the corporation shall be chosen by the Board of Directors and shall be a Chief Executive Officer, a President, a Secretary and a Chief Financial Officer.  The Board of Directors may also choose a Treasurer, one or more Vice Presidents, and one or more assistant Secretaries or assistant Treasurers.  Any number of offices may be held by the same person, unless the certificate of incorporation of the corporation or these bylaws otherwise provide.

 

4.2                                Election .  The Board of Directors shall choose a Chief Executive Officer, a President, a Secretary and a Chief Financial Officer.  Other officers may be appointed by the Board of Directors or may be appointed by the Chief Executive Officer pursuant to a delegation of authority from the Board of Directors.

 

4.3                                Tenure .  Each officer of the corporation shall hold office until such officer’s successor is appointed and qualified, unless a different term is specified in the vote choosing or appointing such officer, or until such officer’s earlier death, resignation, removal or incapacity.  Any officer appointed by the Board of Directors or by the Chief Executive Officer may be removed with or without cause at any time by the affirmative vote of a majority of the Board of Directors or a committee duly authorized to do so.  Any vacancy occurring in any office of the corporation may be filled by the Board of Directors, at its discretion.  Any officer may resign by delivering such officer’s written resignation to the corporation at its principal place of business to the attention of the Chief Executive Officer or the Secretary.  Such resignation shall be effective

 

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upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.

 

4.4                                The Chief Executive Officer .  Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, in the absence of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.  He or she shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.

 

4.5                                The President .  The President shall, in the event there is no Chief Executive Officer or in the absence of the Chief Executive Officer or in the event of his or her disability, perform the duties of the Chief Executive Officer, and when so acting, shall have the powers of and be subject to all the restrictions upon the Chief Executive Officer.  The President shall perform such other duties and have such other powers as may from time to time be prescribed for such person by the Board of Directors, the Chief Executive Officer or these bylaws.

 

4.6                                The Vice President .  The Vice President (or in the event there be more than one, the Vice Presidents in the order designated by the directors, or in the absence of any designation, in the order of their election), shall, in the absence of the President or in the event of his or her disability or refusal to act, perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President.  The Vice President(s) shall perform such other duties and have such other powers as may from time to time be prescribed for them by the Board of Directors, the Chief Executive Officer, the President or these bylaws.

 

4.7                                The Secretary .  The Secretary shall attend all meetings of the Board of Directors and the stockholders and record all votes and the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for the standing committees, when required.  The Secretary shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board of Directors, and shall perform such other duties as may from time to time be prescribed by the Board of Directors, the Chairman of the Board or the Chief Executive Officer, under whose supervision he or she shall act.  The Secretary shall sign such instruments on behalf of the corporation as the Secretary may be authorized to sign by the Board of Directors or by law and shall countersign, attest and affix the corporate seal to all certificates and instruments where such countersigning or such sealing and attesting are necessary to their true and proper execution.  The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.

 

4.8                                The Assistant Secretary .  The Assistant Secretary, or if there be more than one, any Assistant Secretaries in the order designated by the Board of Directors (or in the absence of

 

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any designation, in the order of their election) shall assist the Secretary in the performance of his or her duties and, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors.

 

4.9                                The Chief Financial Officer .  The Chief Financial Officer shall be the principal financial officer in charge of the general accounting books, accounting and cost records and forms.  The Chief Financial Officer may also serve as the principal accounting officer and shall perform such other duties and have other powers as may from time to time be prescribed by the Board of Directors or the Chief Executive Officer.

 

4.10                         The Treasurer and Assistant Treasurers .  The Treasurer (if one is appointed) shall have such duties as may be specified by the Chief Financial Officer to assist the Chief Financial Officer in the performance of his or her duties and to perform such other duties and have other powers as may from time to time be prescribed by the Board of Directors or the Chief Executive Officer.  It shall be the duty of any Assistant Treasurers to assist the Treasurer in the performance of his or her duties and to perform such other duties and have other powers as may from time to time be prescribed by the Board of Directors or the Chief Executive Officer.

 

4.11                         Bond .  If required by the Board of Directors, any officer shall give the corporation a bond in such sum and with such surety or sureties and upon such terms and conditions as shall be satisfactory to the Board of Directors, including without limitation a bond for the faithful performance of the duties of such officer’s office and for the restoration to the corporation of all books, papers, vouchers, money and other property of whatever kind in such officer’s possession or under such officer’s control and belonging to the corporation.

 

4.12                         Delegation of Authority .  The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

 

ARTICLE 5

 

Notices

 

5.1                                Delivery .  Whenever, under the provisions of law, or of the certificate of incorporation of the corporation or these bylaws, written notice is required to be given to any director or stockholder, such notice may be given by mail, addressed to such director or stockholder, at such person’s address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail or delivered to a nationally recognized courier service.  Unless written notice by mail is required by law, written notice may also be given by commercial delivery service, facsimile transmission, electronic means or similar means addressed to such director or stockholder at such person’s address as it appears on the records of the corporation, in which case such notice shall be deemed to be given when delivered into the control of the persons charged with effecting such transmission, the transmission charge to be paid by the corporation or the person sending such notice and not by the addressee.  Oral notice or other

 

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in-hand delivery, in person or by telephone, shall be deemed given at the time it is actually given.

 

5.2                                Waiver of Notice .  Whenever any notice is required to be given under the provisions of law or of the certificate of incorporation of the corporation or of 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 stated therein, 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, directors or members of a committee of directors 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.

 

ARTICLE 6

 

Indemnification and Insurance

 

6.1                                Indemnification of Officers and Directors .  Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “ proceeding ”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or officer of the corporation (or any predecessor), or is or was serving at the request of the corporation (or any predecessor) as a director, officer, employee or agent of another corporation or of a partnership, limited liability company, joint venture, trust, employee benefit plan sponsored or maintained by the corporation, or other enterprise (or any predecessors of such entities) (hereinafter an “ Indemnitee ”), shall be indemnified and held harmless by the corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, including, but not limited to, Section 102(b)(7) of the DGCL (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), or by other applicable law as then in effect, against all expense, liability and loss (including attorneys’ fees and related disbursements, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act of 1974, as amended from time to time, penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such Indemnitee in connection therewith.  Each person who is or was serving as a director, officer, employee or agent of a subsidiary of the corporation shall be deemed to be serving, or have served, at the request of the corporation.  The right to indemnification conferred in this Section 6.1 shall be a contract right.

 

Any indemnification (but not advancement of expenses) under this Article 6 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, as the same exists or hereafter may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said

 

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law permitted the corporation to provide prior to such amendment).  Such determination shall be made with respect to a person who is a director or officer at the time of such determination (a) by a majority vote of the directors who are not or were not parties to the proceeding in respect of which indemnification is being sought by Indemnitee (the “ Disinterested Directors ”), even though less than a quorum, (b) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (c) if there are no such Disinterested Directors, or if the Disinterested Directors so direct, by independent legal counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, or (d) by the stockholders.

 

6.2                                Indemnification of Others .  This Article 6 does not limit the right of the corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than those persons identified in Section 6.1 when and as authorized by the Board or by the action of a committee of the Board or designated officers of the corporation established by or designated in resolutions approved by the Board; provided, however , that the payment of expenses incurred by such a person in advance of the final disposition of the proceeding shall be made only upon receipt by the corporation of a written undertaking by such person to repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified under this Article 6 or otherwise.

 

6.3                                Advance Payment .  The right to indemnification under this Article 6 shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the corporation within thirty (30) days after the receipt by the corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however , that if the DGCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under Section 6.1 or otherwise.

 

Notwithstanding the foregoing, unless such right is acquired other than pursuant to this Article 6,  no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation, in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (a) by the Board of Directors by a majority vote of the Disinterested Directors, even though less than a quorum, or (b) by a committee of Disinterested Directors designated by majority vote of the Disinterested Directors, even though less than a quorum, or (c) if there are no Disinterested Directors or the Disinterested Directors so direct, by independent legal counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

 

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6.4                                Right of Indemnitee to Bring Suit .  If a claim for indemnification (following final disposition of such proceeding) or advancement of expenses under this Article 6 is not paid in full by the corporation within sixty (60) days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim.  If successful in whole or in part in any such suit, or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit to the fullest extent permitted by law.  In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article or otherwise shall be on the corporation.

 

6.5                                Non-Exclusivity and Survival of Rights; Amendments .  The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article 6 shall not be deemed exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation of the corporation, bylaws, agreement, vote of stockholders or Disinterested Directors or otherwise, and shall continue as to a person who has ceased to be a director, officer, employee or agent of the corporation and shall inure to the benefit of the heirs, executors and administrators of such a person.  Any repeal or modification of the provisions of this Article 6 shall not in any way diminish or adversely affect the rights of any director, officer, employee or agent of the corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.

 

6.6                                Insurance .  The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss 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 corporation would have the power to indemnify such person against such expenses, liability or loss under the DGCL.

 

6.7                                Reliance .  Persons who after the date of the adoption of this provision become or remain directors or officers of the corporation shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this Article 6 in entering into or continuing such service.  The rights to indemnification and to the advance of expenses conferred in this Article 6 shall apply to claims made against an Indemnitee arising out of acts or omissions that occurred or occur both prior and subsequent to the adoption hereof.

 

6.8                                Severability .  If any word, clause, provision or provisions of this Article 6 shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article 6 (including, without limitation, each portion of any section or paragraph of this Article 6 containing any such provision held to

 

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be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article 6 (including, without limitation, each such portion of any section or paragraph of this Article 6 containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

ARTICLE 7

 

Capital Stock

 

7.1                                Certificates for Shares .  The shares of the corporation shall be (i) represented by certificates or (ii) uncertificated and evidenced by a book-entry system maintained by or through the corporation’s transfer agent or registrar.  Certificates shall be signed by, or in the name of the corporation by, the Chairman of the Board, the Chief Executive Officer, the President or a Vice President and by the Chief Financial Officer, the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation.  Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.

 

Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send or cause to be sent to the registered owner thereof a written notice containing the information required by the DGCL or a statement that the corporation 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.

 

7.2                                Signatures on Certificates .  Any or all of the signatures on a 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 shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 

7.3                                Transfer of Stock .  Upon surrender to the corporation or the transfer agent of the corporation of a certificate of shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, and proper evidence of compliance of other conditions to rightful transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.  Upon receipt of proper transfer instructions and proper evidence of compliance of other conditions to rightful transfer from the registered owner of uncertificated shares, such uncertificated shares shall be canceled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation.

 

7.4                                Registered Stockholders .  The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends,

 

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and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

7.5                                Lost, Stolen or Destroyed Certificates .  The corporation may direct that a new certificate or certificates be issued to replace any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed and on such terms and conditions as the corporation may require.  When authorizing the issue of a new certificate or certificates, the corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require, to indemnify the corporation in such manner as it may require, and/or to give the corporation a bond or other adequate security in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

 

ARTICLE 8

 

General Provisions

 

8.1                                Dividends .  Dividends upon the capital stock of the corporation, subject to any restrictions contained in the DGCL or the provisions of the certificate of incorporation of the corporation, if any, may be declared by the Board of Directors at any regular or special meeting or by unanimous written consent.  Dividends may be paid in cash, in property or in shares of capital stock, subject to the provisions of the certificate of incorporation of the corporation.

 

8.2                                Checks .  All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

 

8.3                                Corporate Seal .  The Board of Directors may, by resolution, adopt a corporate seal.  The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the word “Delaware.”  The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.  The seal may be altered from time to time by the Board of Directors.

 

8.4                                Execution of Corporate Contracts and Instruments .  The Board of Directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances.  Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

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8.5                                Representation of Shares of Other Corporations .  The Chief Executive Officer, the President or any Vice President, the Chief Financial Officer or the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary of the corporation is authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any corporation or corporations or similar ownership interests of other business entities standing in the name of the corporation.  The authority herein granted to said officers to vote or represent on behalf of the corporation any and all shares or similar ownership interests held by the corporation in any other corporation or corporations or other business entities may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers.

 

ARTICLE 9

 

Amendments

 

These bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the Board of Directors pursuant to the applicable provisions of the certificate of incorporation of the corporation at (a) any regular meeting of the stockholders or of the Board of Directors or (b) any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws is contained in the notice of such special meeting.

 

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CERTIFICATE OF SECRETARY

 

I, the undersigned, hereby certify:

 

(i)                                      That I am a duly elected, acting and qualified Secretary of Invitae Corporation, a Delaware corporation; and

 

(ii)                                   That the foregoing Bylaws, comprising     pages, constitute the Bylaws of such corporation as duly adopted by the board of directors of such corporation on                  , 2015, which Bylaws became effective                  , 2015.

 

IN WITNESS WHEREOF, I have hereunto subscribed my name as of the     th day of             , 2015.

 

 

 

 

 

Lee Bendekgey, Secretary

 




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 Demand If 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 Demand If 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), a s 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 Superseded 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.

 

[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]

 


 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

HAWKES BAY MASTER INVESTORS

 

(CAYMAN) LP

 

 

 

 

 

 

 

By:

Wellington Management Company, LLP, as investment adviser

 

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Its:

Vice President and Counsel

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

NORTH RIVER INVESTORS (BERMUDA) L.P.

 

 

 

 

 

 

 

By:

Wellington Management Company, LLP, as investment adviser

 

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Its:

Vice President and Counsel

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

NORTH RIVER PARTNERS, L.P.

 

 

 

 

By:

Wellington Management Company, LLP, as investment adviser

 

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Its:

Vice President and Counsel

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

SALTHILL INVESTORS (BERMUDA) L.P.

 

 

 

 

By:

Wellington Management Company, LLP, as investment adviser

 

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Its:

Vice President and Counsel

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “Agreement”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

SALTHILL PARTNERS, L.P.

 

 

 

 

By:

Wellington Management Company, LLP, as investment adviser

 

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Its:

Vice President and Counsel

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

ORBIMED PRIVATE INVESTMENTS V, L.P.

 

 

 

 

By:

OrbiMed Capital GP V LLC

 

Its:

General Partner

 

 

 

By:

OrbiMed Advisors LLC

 

Its:

Managing Member

 

 

 

 

 

 

 

By:

/s/ Carl Gordon

 

Name:

Carl Gordon

 

Title:

Member

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

DECHENG CAPITAL CHINA LIFE SCIENCES USD FUND I, L.P.

 

 

 

 

 

 

 

By:

/s/ Xiangmin Cui

 

 

Xiangmin Cui, Managing Director

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

ROCK SPRINGS CAPITAL MASTER FUND LP

 

 

 

 

By:

Rock Springs GP LLC

 

Its:

General Partner

 

 

 

 

 

 

By:

/s/ Graham McPhail

 

Name:

Graham McPhail

 

Title:

Member/Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

DEERFIELD SPECIAL SITUATIONS FUND, L.P.

 

 

 

 

By:

Deerfield Mgmt, L.P.

 

Its:

General Partner

 

 

 

 

By:

J.E. Flynn Capital, LLC

 

Its:

General Partner

 

 

 

 

 

 

 

By:

/s/ David J. Clark

 

 

David J. Clark

 

 

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

DEERFIELD SPECIAL SITUATIONS INTERNATIONAL MASTER FUND, L.P.

 

 

 

 

By:

Deerfield Mgmt, L.P.

 

Its:

General Partner

 

 

 

 

By:

J.E. Flynn Capital, LLC

 

Its:

General Partner

 

 

 

 

 

 

 

By:

/s/ David J. Clark

 

 

David J. Clark

 

 

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 


 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers (he Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below. which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

PERCEPTIVE LIFE SCIENCES MASTER FUND, LTD.

 

 

 

 

 

 

By:

/s/ James Mannix

 

 

James Mannix

 

Title:

C.O.O.

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

TITAN PERC LTD.

 

 

 

 

 

 

By:

/s/ Darren Ross

 

 

Darren Ross

 

Title:

Director

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

BROE HOLDINGS, LLC

 

 

 

 

 

 

By:

/s/ Claude Pumilia

 

 

Claude Pumilia

 

 

Chief Financial Officer and

 

 

Chief Operating Officer

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

BAKER BROTHERS LIFE SCIENCES, L.P.

 

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to Baker Brothers Life Sciences, L.P., pursuant to authority granted to it by Baker Brothers Life Sciences Capital, L.P., general partner to Baker Brothers Life Sciences, L.P., and not as the general partner

 

 

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

14159, L.P.

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to 14159, L.P., pursuant to authority granted to it by 14159 Capital, L.P., general partner to 14159, L.P., and not as the general partner

 

 

 

 

 

By:

/s/ Scott Lessing

 

Scott Lessing, President

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

667, L.P. (account #1)

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to 667, L,P ., pursuant to authority granted to it by Baker Biotech Capital, L.P., general partner to 667, L.P., and not as the general partner

 

 

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

 

667, L.P. (account #2)

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to 667, L,P ., pursuant to authority granted to it by Baker Biotech Capital, L.P., general partner to 667, L.P., and not as the general partner

 

 

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

REDMILE CAPITAL OFFSHORE FUND II, LTD.

 

 

 

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the Investment Manager

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

REDMILE PRIVATE INVESTMENTS I, LP

 

 

 

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the GP and/or Management Company

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

REDMILE PRIVATE INVESTMENTS I AFFILIATES, LP

 

 

 

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the GP and/or Management Company

 

[Signature Page to Investors’ Rights Agreement]

 


 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

REDMILE SPECIAL OPPORTUNITIES FUND, LTD.

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the Investment Manager

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

CASDIN PARTNERS MASTER FUND, LP

 

 

 

By:

Casdin Partners, GP, LLC

 

Its:

Manager

 

 

 

 

 

By:

/s/ Eli Casdin

 

Name:

Eli Casdin

 

Its:

Managing Member

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

THOMAS, MCNERNEY & PARTNERS II, L.P.

 

 

 

By:

Thomas, McNerney & Partners II, LLC

 

Its:

General Partner

 

 

 

 

 

By:

/s/ Eric Aguiar

 

Name:

Eric Aguiar

 

Title:

Manager

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

TMP ASSOCIATES II, L.P.

 

 

 

By:

Thomas, McNerney & Partners II, LLC

 

Its:

General Partner

 

 

 

 

 

By:

/s/ Eric Aguiar

 

Name:

Eric Aguiar

 

Title:

Manager

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

TMP NOMINEE II, LLC

 

 

 

 

 

By:

/s/ Eric Aguiar

 

Name:

Eric Aguiar

 

Title:

Manager

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

/s/ Randal W. Scott

 

Randal W. Scott

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: August 26, 2014

 

 

GENOMIC HEALTH, INC.

 

 

 

 

 

By:

/s/ Kim Popovits

 

Name:

Kim Popovits

 

Title:

CEO

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

BLACKROCK GLOBAL ALLOCATION FUND, INC.

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

BLACKROCK GLOBAL ALLOCATION V.I. FUND OF BLACKROCK VARIABLE SERIES FUNDS, INC.

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

BLACKROCK GLOBAL ALLOCATION

 

PORTFOLIO OF BLACKROCK SERIES FUND, INC.

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 


 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

BLACKROCK GLOBAL ALLOCATION FUND (AUSTRALIA)

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Manager for BlackRock Investment Management (Australia) Limited, the Responsible Entity of BlackRock Global Allocation Fund (Australia)

 

 

 

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

MASSMUTUAL SELECT BLACKROCK GLOBAL ALLOCATION FUND

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

JNL/BLACKROCK GLOBAL ALLOCATION FUND OF JNL SERIES TRUST

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

BLACKROCK GLOBAL FUNDS — GLOBAL ALLOCATION FUND

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

BLACKROCK GLOBAL FUNDS — GLOBAL DYNAMIC EQUITY FUND

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

AZL BLACKROCK GLOBAL ALLOCATION FUND, A SERIES OF ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page i s attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

BLACKROCK GLOBAL ALLOCATION COLLECTIVE FUND

 

 

 

By:

BlackRock Institutional Trust Company, N.A.

 

Its:

Not in its individual capacity but as Trustee of the BlackRock Global Allocation Collective Fund

 

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 7, 2014

 

 

667, L.P. (account #1)

 

 

 

By:

BAKER BROS. ADVISORS LP , management company and investment adviser to 667, L.P., pursuant to authority granted to it by Baker Biotech, Capital, L.P., general partner to 667, L.P., and not as the general partner

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 7, 2014

 

 

667, L.P. (account #2)

 

 

 

By:

BAKER BROS. ADVISORS LP , management company and investment adviser to 667, L.P., pursuant to authority granted to it by Baker Biotech Capital, L.P., general partner to 667, L.P., and not as the general partner

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 7, 2014

 

 

BAKER BROTHERS LIFE SCIENCES, L.P.

 

 

 

By:

BAKER BROS. ADVISORS LP , management company and investment adviser to Baker Brothers Life Sciences, L.P., pursuant to authority granted to it by Baker Brothers Life Sciences Capital L.P., general partner to Baker Brothers Life Sciences, L.P., and not as the general partner

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

[Signature Page to Investors’ Rights Agreement]

 



 

ADDITIONAL SIGNATURE PAGE TO

INVITAE CORPORATION

FIFTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

DATED AS OF AUGUST 26, 2014

 

The undersigned hereby executes and delivers the Fifth Amended and Restated Investors’ Rights Agreement (the “ Agreement ”) to which this additional signature page is attached effective as the date set forth below, which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Effective Date: October 9, 2014

 

 

GENESYS VENTURES II LP

 

 

 

By its general partner, Genesys General Partner LP

 

 

 

By its general partner, Genesys General Partner Inc.

 

 

 

By:

/s/ Kelly Holman

 

Name:

Kelly Holman

 

Its:

A/S

 

[Signature Page to Investors’ Rights Agreement]

 


 

SCHEDULE A

 

INVESTORS

 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

667, L.P., (account #1)

c/o Baker Bros. Advisors LP

 

 

519,040 Series D Preferred

636,078 Series E Preferred

756,292 Series F Preferred

 

 

 

667, L.P., (account #2)

c/o Baker Bros. Advisors LP

 

 

363,200 Series D Preferred

445,098 Series E Preferred

535,374 Series F Preferred

 

 

 

Baker Brothers Life Sciences, L.P.

c/o Baker Bros. Advisors LP

 

 

6,944,640 Series D Preferred

8,510,588 Series E Preferred

11,153,380 Series F Preferred

 

 

 

14159, L.P.

c/o Baker Bros. Advisors LP

 

 

173,120 Series D Preferred

212,157 Series E Preferred

54,954 Series F Preferred

 

 

 

Thomas, McNerney & Partners II, L.P.

 

 

11,206,817 Series A Preferred

5,190,524 Series C Preferred

3,222,221 Series E Preferred

2,478,250 Series F Preferred

 

 

 

TMP Nominee II, LLC

 

 

117,046 Series A Preferred

54,210 Series C Preferred

33,660 Series E Preferred

12,500 Series F Preferred

 

 

 

TMP Associates II, L.P.

 

 

39,773 Series A Preferred

18,421 Series C Preferred

12,092 Series E Preferred

9,250 Series F Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

Genomic Health, Inc.

 

4,181,818 Series B Preferred

4,796,968 Series C Preferred

3,267,973 Series E Preferred

1,000,000 Series F Preferred

 

 

 

Randal W. Scott

 

15,715,788 Series C Preferred

3,921,568 Series E Preferred

1,000,000 Series F Preferred

 

 

 

Aaron Scott

 

 

200,000 Series C Preferred

130,718 Series E Preferred

 

 

 

Brandon Scott

 

200,000 Series C Preferred

 

 

 

Taylor Scott

 

200,000 Series C Preferred

 

 

 

Sean E. George

 

11,363 Series A Preferred

 

 

 

Michele Cargill

 

11,363 Series A Preferred

 

 

 

Alex Furman

 

11,363 Series A Preferred

 

 

 

Jon Parker

 

3,750 Series A Preferred

 

 

 

Braeden Mass

 

3,750 Series A Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

Ravish Bhalla

 

3,864 Series A Preferred

 

 

 

The George Living Trust

 

284,090 Series A Preferred

 

 

 

Lisa Alderson

 

26,315 Series C Preferred

19,607 Series E Preferred

 

 

 

Apoletto Limited

c/o Tulloch & Co.

 

526,315 Series C Preferred

 

 

 

 

Joffre and Diana Baker 1998 Trust

 

210,526 Series C Preferred

65,359 Series E Preferred

 

 

 

Deborah E. Crowder

 

278,947 Series C Preferred

 

 

 

Genesys Ventures II LP

 

3,157,895 Series C Preferred

1,307,189 Series E Preferred

500,000 Series F Preferred

 

 

 

Todd L. Henderson

 

78,947 Series C Preferred

 

 

 

Maneesh Jain

 

105,263 Series C Preferred

65,359 Series E Preferred

 

 

 

Stephen E. Lincoln

 

36,842 Series C Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

Donald N. and Patricia E. Scott

 

105,263 Series C Preferred

 

 

 

Morgan Stanley Custodian for Terri E. Todd

ROTH IRA

 

105,263 Series C Preferred

 

 

 

Morgan Stanley Custodian for Mike E. Todd

ROTH IRA

 

105,263 Series C Preferred

 

 

 

Casdin Partners Master Fund, LP

 

1,307,189 Series E Preferred

1,500,000 Series F Preferred

 

 

 

Redmile Private Investments I, LP

 

1,373,444 Series E Preferred

859,880 Series F Preferred

 

 

 

Redmile Private Investments I Affiliates, LP

 

640,120 Series F Preferred

 

 

 

Redmile Capital Fund, LP

 

152,433 Series E Preferred

 

 

 

Redmile Capital Offshore Fund, Ltd.

 

89,101 Series E Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

Redmile Capital Offshore Fund II, Ltd.

 

319,159 Series E Preferred

450,443 Series F Preferred

 

 

 

Redmile Special Opportunities Fund, Ltd.

 

26,647 Series E Preferred

49,557 Series F Preferred

 

 

 

Richard E. Crowder IRA

 

202, 614 Series E Preferred

 

 

 

Brandon D. Scott 1997 Trust

 

130,718 Series E Preferred

 

 

 

Taylor E. Scott 1997 Trust

 

130,718 Series E Preferred

 

 

 

Terri E. Todd

 

26,000 Series E Preferred

 

 

 

Terri E. Todd, IRA

 

85,039 Series E Preferred

 

 

 

Mike Todd, IRA

 

85,039 Series E Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

Diane Logan & David Logan Family

Revocable Living Trust

 

202,614 Series E Preferred

 

 

 

Douglas Andrew Gonzales

c/o Coldwell Banker

 

65,359 Series E Preferred

 

 

 

April Lynch

 

32,679 Series E Preferred

 

 

 

Geoffrey B. Nilsen

 

22,875 Series E Preferred

 

 

 

Fitzgerald Tenancy-by-the-Entirety Trust

 

19,607 Series E Preferred

 

 

 

Patty Dumond

 

22,875 Series E Preferred

 

 

 

Hawkes Bay Master Investors (Cayman) LP

c/o Wellington Management Company, LLP

 

1,216,700 Series F Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

North River Investors (Bermuda) LP

c/o Wellington Management Company, LLP

 

765,100 Series F Preferred

 

 

 

North River Partners, L.P.

c/o Wellington Management Company, LLP

 

1,760,200 Series F Preferred

 

 

 

Salthill Investors (Bermuda) L.P.

c/o Wellington Management Company, LLP

 

512,200 Series F Preferred

 

 

 

Salthill Partners, L.P.

c/o Wellington Management Company, LLP

 

745,800 Series F Preferred

 

 

 

ORBIMED PRIVATE INVESTMENTS V, L.P.

 

2,500,000 Series F Preferred

 

 

 

Decheng Capital China Life Sciences USD Fund I, L.P.

 

2,000,000 Series F Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

Rock Springs Capital Master Fund LP

 

1,500,000 Series F Preferred

 

 

 

Deerfield Special Situations Fund, L.P.

c/o Deerfield Management Company

 

555,000 Series F Preferred

 

 

 

Deerfield Special Situations International Master Fund, L.P.

c/o Deerfield Management Company

 

445,000 Series F Preferred

 

 

 

Perceptive Life Sciences Master Fund, Ltd.

 

867,500 Series F Preferred

 

 

 

Titan Perc Ltd.

 

132,500 Series F Preferred

 

 

 

Broe Holdings, LLC

 

1,000,000 Series F Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

AZL BlackRock Global Allocation Fund, a Series of Allianz Variable Insurance Products Trust

c/o Global Allocation Group

 

186,439 Series F Preferred

 

 

 

BlackRock Global Allocation Collective Fund

c/o Global Allocation Group

 

429,424 Series F Preferred

 

 

 

BlackRock Global Allocation Fund (Australia)

c/o Global Allocation Group

 

247,498 Series F Preferred

 

 

 

BlackRock Global Allocation Fund, Inc.

c/o Global Allocation Group

 

14,195,190 Series F Preferred

 

 

 

BlackRock Global Allocation Portfolio of BlackRock Series Fund, Inc.

c/o Global Allocation Group

 

64,815 Series F Preferred

 



 

Name and Address

 

Number of Shares of Preferred Stock Held

 

 

 

BlackRock Global Allocation V.I. Fund of BlackRock Variable Series Funds, Inc.

c/o Global Allocation Group

 

2,896,633 Series F Preferred

 

 

 

BlackRock Global Funds — Global Allocation Fund

c/o Global Allocation Group

 

5,603,429 Series F Preferred

 

 

 

BlackRock Global Funds — Global Dynamic Equity Fund

c/o Global Allocation Group

 

369,458 Series F Preferred

 

 

 

JNL/BlackRock Global Allocation Fund of JNL Series Trust

c/o Global Allocation Group

 

839,273 Series F Preferred

 

 

 

MassMutual Select BlackRock Global Allocation Fund

c/o Global Allocation Group

 

167,841 Series F Preferred

 




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 Demand If 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



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

BLACKROCK GLOBAL ALLOCATION FUND, INC.

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

14,195,190

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$28,390,380

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

BLACKROCK GLOBAL ALLOCATION FUND, V.I. FUND OF BLACKROCK VARIABLE SERIES FUNDS, INC.

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

2,896,633

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$5,793,266

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

BLACKROCK GLOBAL ALLOCATION PORTFOLIO OF BLACKROCK SERIES FUND, INC.

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

64,815

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$129,630

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

BLACKROCK GLOBAL ALLOCATION FUND (AUSTRALIA)

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Manager for BlackRock Investment Management (Australia) Limited, the Responsible Entity of BlackRock Global Allocation Fund (Australia)

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

247,498

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$494,996

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

MASSMUTUAL SELECT BLACKROCK GLOBAL ALLOCATION FUND

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

167,841

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$335,682

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

JNL/BLACKROCK GLOBAL ALLOCATION FUND OF JNL SERIES TRUST

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

839,273

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$1,678,546

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

BLACKROCK GLOBAL FUNDS — GLOBAL ALLOCATION FUND

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

5,603,429

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$11,206,858

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

BLACKROCK GLOBAL FUNDS — GLOBAL DYNAMIC EQUITY FUND

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

369,458

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$738,916

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

AZL BLACKROCK GLOBAL ALLOCATION FUND, A SERIES OF ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST

 

 

 

By:

BlackRock Investment Management, LLC

 

Its:

Investment Sub-Adviser

 

 

 

By:

/s/ David Clayton

 

Name:

David Clayton

 

Title:

Authorized Signatory

 

Note :       Below information is only relevant for Purchasers in Final Closing

 

186,439

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

$372,878

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 


 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

667, L.P. (account #1)

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to 667, L.P., pursuant to authority granted to it by Baker Biotech Capital, L.P., general partner to 667, L.P., and not as the general partner

 

 

 

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

629,600

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

$1,259,200.00

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

667, L.P. (account #2)

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to 667, L.P., pursuant to authority granted to it by Baker Biotech Capital, L.P., general partner to 667, L.P., and not as the general partner

 

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

447,230

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

$894,460

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

BAKER BROTHERS LIFE SCIENCES, L.P.

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to Baker Brothers Life Sciences, L.P., pursuant to authority granted to it by Baker Brothers Life Sciences Capital, L.P., general partner to Baker Brothers Life Sciences, L.P., and not as the general partner

 

 

 

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

8,923,170

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

$17,846,340

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

14159, L.P.

 

 

 

By:

BAKER BROS. ADVISORS LP,

 

 

management company and investment adviser to 14159, L.P., pursuant to authority granted to it by 14159 Capital, L.P., general partner to 14159, and not as the general partner

 

 

 

 

 

 

 

By:

/s/ Scott Lessing

 

 

Scott Lessing, President

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

GENESYS VENTURES II LP

 

 

 

By its general partner, Genesys General Partner LP

 

 

 

By its general partner, Genesys General Partner Inc.

 

 

 

 

 

By:

/s/ Kelly Holman

 

Name:

Kelly Holman

 

Title:

A/S

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

500,000

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

$1,000,000

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

CASDIN PARTNERS MASTER FUND, LP

 

 

 

By:

Casdin Partners, GP, LLC

 

Its:

Manager

 

 

 

 

 

 

 

By:

/s/ Eli Casdin

 

Name:

Eli Casdin

 

Its:

Managing Member

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

/s/ Randal W. Scott

 

Randal W. Scott

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

GENOMIC HEALTH, INC.

 

 

 

 

 

By:

/s/ Brad Cole

 

Name:

Brad Cole

 

Title:

COO & CFO

 

Note :  Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

BROE HOLDINGS, LLC

 

 

 

 

 

By:

/s/ Pat Broe

 

 

Pat Broe

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

ORBIMED PRIVATE INVESTMENTS V, L.P.

 

 

 

By:

OrbiMed Capital GP V LLC

 

Its:

General Partner

 

 

 

 

By:

OrbiMed Advisors LLC

 

Its:

Managing Member

 

 

 

 

 

 

 

By:

/s/ Carl Gordon

 

Name:

Carl Gordon

 

Title:

Member

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 


 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

PERCEPTIVE LIFE SCIENCES MASTER

 

FUND, LTD.

 

 

 

 

 

By:

/s/ James Mannix

 

 

James Mannix

 

Title:

C.O.O

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

REDMILE PRIVATE INVESTMENTS I, LP

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the GP and/or

 

 

Management Company

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

REDMILE PRIVATE INVESTMENTS I

 

AFFILIATES, LP

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the GP and/or

 

 

Management Company

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

REDMILE CAPITAL FUND, LP

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the Investment

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

REDMILE CAPITAL OFFSHORE FUND, LTD.

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the Investment

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

REDMILE CAPITAL OFFSHORE FUND II, LTD.

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the Investment

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

REDMILE SPECIAL OPPORTUNITIES FUND, LTD.

 

 

 

 

 

By:

/s/ Jeremy Green

 

 

Jeremy Green

 

 

Managing Member of the Investment

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7 th , 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

ROCK SPRINGS CAPITAL MASTER FUND LP

 

 

 

By:

Rock Springs GP LLC

 

Its:

General Partner

 

 

 

 

 

By:

/s/ Graham Mcphail

 

Name:

Graham Mcphail

 

Title:

Managing Director / Member

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

TITAN PERC LTD.

 

 

 

 

 

 

By:

/s/ Darren Ross

 

 

Darren Ross

 

Title:

Director

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

THOMAS, McNERNEY & PARTNERS II, L.P.

 

 

 

By:

Thomas, McNerney & Partners II, LLC

 

Its:

General Partner

 

 

 

 

 

By:

/s/ Eric Aguiar

 

 

Eric Aguiar

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 


 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

TMP NOMINEE II, LLC

 

 

 

By:

/s/ Eric Aguiar

 

 

Eric Aguiar

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 9, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

TMP ASSOCIATES II, L.P.

 

 

 

By:

Thomas, McNerney & Partners II, LLC

 

Its:

General Partner

 

 

 

By:

/s/ Eric Aguiar

 

 

Eric Aguiar

 

 

Manager

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

HAWKES BAY MASTER INVESTORS (CAYMAN) LP

 

 

 

By:

Wellington Management Company, LLP,

 

 

as investment adviser

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Title:

Vice President and Counsel

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

NORTH RIVER INVESTORS (BERMUDA) L.P.

 

 

 

By:

Wellington Management Company, LLP,

 

 

as investment adviser

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Title:

Vice President and Counsel

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

NORTH RIVER PARTNERS, L.P.

 

 

 

By:

Wellington Management Company, LLP,

 

 

as investment adviser

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Title:

Vice President and Counsel

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7, 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

SALTHILL INVESTORS (BERMUDA) L.P.

 

 

 

By:

Wellington Management Company, LLP,

 

 

as investment adviser

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Title:

Vice President and Counsel

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 



 

SIGNATURE PAGE TO

INVITAE CORPORATION

OMNIBUS APPROVAL AND AMENDMENT

DATED AS OF OCTOBER 7 , 2014

 

The undersigned hereby executes and delivers the Omnibus Approval and Amendment (the “ Amendment ”) to which this additional signature page is attached effective as the Effective Date (as defined in the Amendment), which, together with all counterparts thereto and signature pages of the other parties with respect thereto, shall constitute one and the same document in accordance with the terms of the Amendment.

 

 

 

SALTHILL PARTNERS, L.P.

 

 

 

By:

Wellington Management Company, LLP,

 

 

as investment adviser

 

 

 

 

By:

/s/ Steven M. Hoffman

 

Name:

Steven M. Hoffman

 

Title:

Vice President and Counsel

 

Note : Below information is only relevant for Purchasers in Final Closing

 

 

-

Shares of Series F Preferred Stock Purchased in Final Closing

 

 

 

 

-

Aggregate Purchase Price for Final Closing Investment

 

[Signature page to Omnibus Approval and Amendment]

 


 

SCHEDULE A

 

Subsequent Purchasers ” are the following persons and entities:

 

Purchaser

 

Shares Purchased

 

Purchase Price

 

BlackRock Global Allocation Fund, Inc.

 

14,195,190

 

$

28,390,380

 

BlackRock Global Allocation V.I. Fund of BlackRock Variable Series Funds, Inc.

 

2,896,633

 

$

5,793,266

 

BlackRock Global Allocation Portfolio of BlackRock Series Fund, Inc.

 

64,815

 

$

129,630

 

BlackRock Global Allocation Fund (Australia)

 

247,498

 

$

494,996

 

MassMutual Select BlackRock Global Allocation Fund

 

167,841

 

$

335,682

 

JNL/BlackRock Global Allocation Fund of JNL Series Trust

 

839,273

 

$

1,678,546

 

BlackRock Global Funds — Global Allocation Fund

 

5,603,429

 

$

11,206,858

 

BlackRock Global Funds — Global Dynamic Equity Fund

 

369,458

 

$

738,916

 

AZL BlackRock Global Allocation Fund, a Series of Allianz Variable Insurance Products Trust

 

186,439

 

$

372,878

 

BlackRock Global Allocation Collective Fund

 

429,424

 

$

858,848

 

667, L.P. (account #1)

 

629,600

 

$

1,259,200

 

667, L.P. (account #2)

 

447,230

 

$

894,460

 

Baker Brothers Life Sciences, L.P.

 

8,923,170

 

$

17,846,340

 

Genesys Ventures II LP

 

500,000

 

$

1,000,000

 

TOTAL:

 

35,500,000

 

$

71,000,000

 

 




Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “ Agreement ”), dated as of             , 2015, between Invitae Corporation, a Delaware corporation (the “ Corporation ”), and               (“ Indemnitee ”),

 

W I T N E S S E T H:

 

WHEREAS, Indemnitee is either a member of the board of directors of the Corporation (the “ Board of Directors ”) or an officer of the Corporation, or both, and in such capacity or capacities, or otherwise as an Agent (as hereinafter defined) of the Corporation, is performing a valuable service for the Corporation; and

 

WHEREAS, the Corporation is aware that competent and experienced persons are increasingly reluctant to serve as directors or officers of corporations or other business entities unless they are protected by comprehensive indemnification and liability insurance, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and because the exposure frequently bears no reasonable relationship to the compensation of such directors and officers; and

 

WHEREAS, the Board of Directors of the Corporation has concluded that, to retain and attract talented and experienced individuals to serve or continue to serve as officers or directors of the Corporation or as an Agent, and to encourage such individuals to take the business risks necessary for the success of the Corporation, it is necessary for the Corporation contractually to indemnify directors, officers and Agents and to assume for itself to the fullest extent permitted by law expenses and damages in connection with claims against such officers, directors and Agents in connection with their service to the Corporation; and

 

WHEREAS, Section 145 of the General Corporation Law of the State of Delaware (the “DGCL”), under which the Corporation is organized, empowers the Corporation to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Corporation, as directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by the DGCL is not exclusive; and

 

WHEREAS, the Corporation desires and has requested the Indemnitee to serve or continue to serve as a director, officer or Agent of the Corporation free from undue concern for claims for damages arising out of or related to such services to the Corporation; and

 

WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Corporation on the condition that he or she be indemnified as herein provided; and

 

WHEREAS, it is intended that Indemnitee shall be paid promptly by the Corporation all amounts necessary to effectuate in full the indemnity provided herein; and

 

WHEREAS, certain defined terms are set forth in Section 17 below:

 



 

NOW, THEREFORE, in consideration of the premises and the covenants in this Agreement, and of Indemnitee serving or continuing to serve the Corporation as an Agent and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.               Services by Indemnitee .  Indemnitee agrees to serve or continue to serve (a) as a director or an officer of the Corporation, or both, so long as Indemnitee is duly appointed or elected and qualified, and until such time as Indemnitee resigns or fails to stand for election or is removed from Indemnitee’s position in each case in accordance with the applicable provisions of the Certificate of Incorporation and Bylaws of the Corporation, or (b) otherwise as an Agent of the Corporation.  Indemnitee may from time to time also perform other services at the request or for the convenience of, or otherwise benefiting the Corporation or any subsidiary of the Corporation.  Indemnitee may at any time and for any reason resign or be removed from such position (subject to any other contractual obligation or other obligation imposed by operation of law), in which event the Corporation shall have no obligation under this Agreement to continue Indemnitee in any such position.

 

2.                                       Indemnification of Indemnitee .  Subject to the limitations set forth herein and particularly in Section 6 hereof, the Corporation hereby agrees to indemnify Indemnitee as follows:

 

(a)                                  The Corporation shall, with respect to any Proceeding (as hereinafter defined), indemnify Indemnitee to the fullest extent permitted by applicable law or as such law may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits the Corporation to provide broader indemnification rights than the law permitted the Corporation to provide before such amendment).  The right to indemnification conferred herein shall be presumed to have been relied upon by Indemnitee in serving or continuing to serve the Corporation as an Agent and shall be enforceable as a contract right.  Without in any way diminishing the scope of the indemnification provided by this Section 2(a), the rights of indemnification of Indemnitee shall include but shall not be limited to those rights hereinafter set forth.

 

(b)                                  The Corporation shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Corporation) by reason of the fact that Indemnitee is or was an Agent of the Corporation, or any subsidiary of the Corporation, or by reason of the fact that Indemnitee is or was serving at the request of the Corporation as an Agent of another corporation, partnership, joint venture, trust or other enterprise, against Expenses (as hereinafter defined) or Liabilities (as hereinafter defined), actually and reasonably incurred by Indemnitee in connection with such Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.

 

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(c)                                   The Corporation shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Corporation or any subsidiary of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was an Agent of the Corporation, or any subsidiary of the Corporation, or by reason of the fact that Indemnitee is or was serving at the request of the Corporation as an Agent of another corporation, partnership, joint venture, trust or other enterprise, against Expenses and, to the fullest extent permitted by law, Liabilities if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware 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, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper.

 

3.                                       Advancement of Expenses .  All reasonable Expenses incurred by or on behalf of Indemnitee (including costs of enforcement of this Agreement) shall be advanced from time to time by the Corporation to Indemnitee within thirty (30) days after the receipt by the Corporation of a written request for an advance of Expenses, whether prior to or after final disposition of a Proceeding (except to the extent that there has been a Final Adverse Determination (as hereinafter defined) that Indemnitee is not entitled to be indemnified for such Expenses), including without limitation any Proceeding brought by or in the right of the Corporation.  The written request for an advancement of any and all Expenses under this paragraph shall contain reasonable detail of the Expenses incurred by Indemnitee.  In the event that such written request shall be accompanied by an affidavit of counsel to Indemnitee to the effect that such counsel has reviewed such Expenses and that such Expenses are reasonable in such counsel’s view, then such expenses shall be deemed reasonable in the absence of clear and convincing evidence to the contrary.  By execution of this Agreement, Indemnitee shall be deemed to have made whatever undertaking as may be required by law at the time of any advancement of Expenses with respect to repayment to the Corporation of such Expenses.  In the event that the Corporation shall breach its obligation to advance Expenses under this Section 3, the parties hereto agree that Indemnitee’s remedies available at law would not be adequate and that Indemnitee would be entitled to specific performance.

 

4.                                       Presumptions and Effect of Certain Proceedings .  Upon making a request for indemnification, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and the Corporation shall have the burden of proof to overcome that presumption in reaching any contrary determination.  The termination of any Proceeding by judgment, order, settlement, arbitration award or conviction, or upon a plea of nolo contendere or its equivalent shall not affect this presumption or, except as determined by a judgment or other final adjudication adverse to Indemnitee, establish a presumption with regard to any factual matter relevant to determining Indemnitee’s rights to indemnification hereunder.  If the person or persons so empowered to make a determination pursuant to Section 5 hereof shall have failed to make the requested determination within the period provided for in Section 5 hereof, a determination that Indemnitee is entitled to indemnification shall be deemed to have been made.

 

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5.                                       Procedure for Determination of Entitlement to Indemnification .

 

(a)                                  Whenever Indemnitee believes that Indemnitee is entitled to indemnification pursuant to this Agreement, Indemnitee shall submit a written request for indemnification to the Corporation.  Any request for indemnification shall include sufficient documentation or information reasonably available to Indemnitee for the determination of entitlement to indemnification.  In any event, Indemnitee shall submit Indemnitee’s claim for indemnification within a reasonable time, not to exceed five (5) years after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of a plea of nolo contendere or its equivalent, or final determination, whichever is the later date for which Indemnitee requests indemnification.  The Secretary or other appropriate officer shall, promptly upon receipt of Indemnitee’s request for indemnification, advise the Board of Directors in writing that Indemnitee has made such request.  Determination of Indemnitee’s entitlement to indemnification shall be made not later than sixty (60) days after the Corporation’s receipt of Indemnitee’s written request for such indemnification, provided that any request for indemnification for Liabilities, other than amounts paid in settlement, shall have been made after a determination thereof in a Proceeding.  If it is so determined that the Indemnitee is entitled to indemnification, and Indemnitee has already paid the Liabilities, reimbursement to the Indemnitee shall be made within ten (10) days after such determination; otherwise, the Corporation shall pay the Liabilities on behalf of the Indemnitee if and when the Indemnitee becomes legally obligated to make payment.

 

(b)                                  The Corporation shall be entitled to select the forum in which Indemnitee’s entitlement to indemnification will be heard; provided , however , that if there is a Change in Control of the Corporation, Independent Legal Counsel (as hereinafter defined) shall determine whether Indemnitee is entitled to indemnification.  The forum shall be any one of the following:

 

(i)                                      a majority vote of Disinterested Directors (as hereinafter defined), even though less than a quorum;

 

(ii)                                   by a committee of Disinterested Directors designated by majority vote of Disinterested Directors, even though less than a quorum;

 

(iii)                                Independent Legal Counsel, whose determination shall be made in a written opinion; or

 

(iv)                               the stockholders of the Corporation.

 

6.                                       Specific Limitations on Indemnification .  Notwithstanding anything in this Agreement to the contrary, the Corporation shall not be obligated under this Agreement to make any payment to Indemnitee with respect to any Proceeding (and Indemnitee hereby waives and relinquishes any right under this Agreement, the Certificate of Incorporation, the Bylaws or otherwise to be indemnified and held harmless or to receive any advancement of Expenses):

 

(a)                                  To the extent that payment is actually made to Indemnitee under any insurance policy, or is made to Indemnitee by the Corporation or an affiliate otherwise than pursuant to this Agreement.  Notwithstanding the availability of such insurance, Indemnitee also may claim indemnification from the Corporation pursuant to this Agreement by assigning to the Corporation any claims under such insurance to the extent Indemnitee is paid by the Corporation;

 

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(b)                                  Provided there has been no Change in Control, for Liabilities in connection with Proceedings settled without the Corporation’s consent, which consent, however, shall not be unreasonably withheld;

 

(c)                                   For an accounting of profits made from the purchase or sale by Indemnitee of securities of the Corporation within the meaning of section 16(b) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or similar provisions of any state statutory or common law;

 

(d)                                  To the extent it would be otherwise prohibited by law, if so established by a judgment or other final adjudication adverse to Indemnitee; or

 

(e)                                   In connection with a Proceeding commenced by Indemnitee (other than a Proceeding commenced by Indemnitee to enforce Indemnitee’s rights under this Agreement) unless the commencement of such Proceeding was authorized by the Board of Directors.

 

7.                                       Fees and Expenses of Independent Legal Counsel .  The Corporation agrees to pay the reasonable fees and expenses of Independent Legal Counsel should such Independent Legal Counsel be retained to make a determination of Indemnitee’s entitlement to indemnification pursuant to Section 5(b) of this Agreement, and to fully indemnify such Independent Legal Counsel against any and all expenses and losses incurred by any of them arising out of or relating to this Agreement or their engagement pursuant hereto.

 

8.                                       Remedies of Indemnitee .

 

(a)                                  In the event that (i) a determination pursuant to Section 5 hereof is made that Indemnitee is not entitled to indemnification, (ii) advances of Expenses are not made pursuant to this Agreement, (iii) payment has not been timely made following a determination of entitlement to indemnification pursuant to this Agreement, or (iv) Indemnitee otherwise seeks enforcement of this Agreement, Indemnitee shall be entitled to a final adjudication in the Court of Chancery of the State of Delaware of the remedy sought.  Alternatively, unless court approval is required by law for the indemnification sought by Indemnitee, Indemnitee at Indemnitee’s option may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial arbitration rules of the American Arbitration Association now in effect, which award is to be made within ninety (90) days following the filing of the demand for arbitration.  The Corporation shall not oppose Indemnitee’s right to seek any such adjudication or arbitration award.  In any such proceeding or arbitration Indemnitee shall be presumed to be entitled to indemnification and advancement of Expenses under this Agreement and the Corporation shall have the burden of proof to overcome that presumption.

 

(b)                                  In the event that a determination that Indemnitee is not entitled to indemnification, in whole or in part, has been made pursuant to Section 5 hereof, the decision in the judicial proceeding or arbitration provided in paragraph (a) of this Section 8 shall be made de novo and Indemnitee shall not be prejudiced by reason of a determination that Indemnitee is not entitled to indemnification.

 

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(c)                                   If a determination that Indemnitee is entitled to indemnification has been made pursuant to Section 5 hereof, or is deemed to have been made pursuant to Section 4 hereof or otherwise pursuant to the terms of this Agreement, the Corporation shall be bound by such determination.

 

(d)                                  The Corporation shall be precluded from asserting that the procedures and presumptions of this Agreement are not valid, binding and enforceable.  The Corporation shall stipulate in any such court or before any such arbitrator that the Corporation is bound by all the provisions of this Agreement and is precluded from making any assertion to the contrary.

 

(e)                                   Expenses reasonably incurred by Indemnitee in connection with Indemnitee’s request for indemnification under, seeking enforcement of or to recover damages for breach of this Agreement shall be advanced by the Corporation when and as incurred by Indemnitee irrespective of any Final Adverse Determination that Indemnitee is not entitled to indemnification.

 

9.                                       Contribution .  To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Corporation, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Corporation and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Corporation (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

10.                                Maintenance of Insurance .  The Corporation represents that it presently has in place certain directors’ and officers’ liability insurance policies covering its directors and officers.  Subject only to the provisions within this Section 10, the Corporation agrees that so long as Indemnitee shall have consented to serve or shall continue to serve as a director or officer of the Corporation, or both, or as an Agent of the Corporation, and thereafter so long as Indemnitee shall be subject to any possible Proceeding (such periods being hereinafter sometimes referred to as the “ Indemnification Period ”), the Corporation will use all reasonable efforts to maintain in effect for the benefit of Indemnitee one or more valid, binding and enforceable policies of directors’ and officers’ liability insurance from established and reputable insurers, providing, in all respects, coverage both in scope and amount which is no less favorable than that presently provided or, following the Corporation’s initial public offering, than that provided as of the time of such initial public offering.  Notwithstanding the foregoing, the Corporation shall not be required to maintain said policies of directors’ and officers’ liability insurance during any time period if during such period such insurance is not reasonably available or if it is determined in good faith by the then directors of the Corporation either that:

 

(i)                                      The premium cost of maintaining such insurance is substantially disproportionate to the amount of coverage provided thereunder; or

 

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(ii)                                   The protection provided by such insurance is so limited by exclusions, deductions or otherwise that there is insufficient benefit to warrant the cost of maintaining such insurance.

 

Anything in this Agreement to the contrary notwithstanding, to the extent that and for so long as the Corporation shall choose to continue to maintain any policies of directors’ and officers’ liability insurance during the Indemnification Period, the Corporation shall maintain similar and equivalent insurance for the benefit of Indemnitee during the Indemnification Period (unless such insurance shall be less favorable to Indemnitee than the Corporation’s existing policies).

 

11.                                Modification, Waiver, Termination and Cancellation .  No supplement, modification, termination, cancellation or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

 

12.                                Subrogation .  In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.

 

13.                                Notice by Indemnitee and Defense of Claim .  Indemnitee shall promptly notify the Corporation in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any matter, whether civil, criminal, administrative or investigative that may result in the right to indemnification or the advancement of Expenses, but the omission so to notify the Corporation will not relieve it from any liability that it may have to Indemnitee if such omission does not prejudice the Corporation’s rights.  If such omission does prejudice the Corporation’s rights, the Corporation will be relieved from liability only to the extent of such prejudice.  Notwithstanding the foregoing, such omission will not relieve the Corporation from any liability that it may have to Indemnitee otherwise than under this Agreement.  With respect to any Proceeding as to which Indemnitee notifies the Corporation of the commencement thereof:

 

(a)                                  The Corporation will be entitled to participate therein at its own expense; and

 

(b)                                  The Corporation jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee; provided , however , that the Corporation shall not be entitled to assume the defense of any Proceeding if there has been a Change in Control or if Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Corporation and Indemnitee with respect to such Proceeding.  After notice from the Corporation to Indemnitee of its election to assume the defense thereof, the Corporation will not be liable to Indemnitee under this Agreement for any Expenses subsequently incurred by Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below.  Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless:

 

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(i)                                      the employment of counsel by Indemnitee has been authorized by the Corporation;

 

(ii)                                   Indemnitee shall have reasonably concluded that counsel engaged by the Corporation may not adequately represent Indemnitee due to, among other things, actual or potential differing interests; or

 

(iii)                                the Corporation shall not in fact have employed counsel to assume the defense in such Proceeding or shall not in fact have assumed such defense and be acting in connection therewith with reasonable diligence; in each of which cases the fees and expenses of such counsel shall be at the expense of the Corporation.

 

(c)                                   The Corporation shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent; provided , however , that Indemnitee will not unreasonably withhold his or her consent to any proposed settlement.

 

14.                                Notices .  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

 

(a)                                  If to Indemnitee, to the address set forth below Indemnitee’s signature on the signature page hereof.

 

(b)                                  If to the Corporation, to:

Invitae Corporation

458 Brannan Street

San Francisco, CA 94107

 

or to such other address as may have been furnished to Indemnitee by the Corporation or to the Corporation by Indemnitee, as the case may be.

 

15.                                Nonexclusivity .  The rights of Indemnitee hereunder shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under applicable law, the Corporation’s Certificate of Incorporation or Bylaws, or any agreements, vote of stockholders, resolution of the Board of Directors or otherwise, and to the extent that during the Indemnification Period the rights of the then existing directors and officers are more favorable to such directors or officers than the rights currently provided to Indemnitee thereunder or under this Agreement, Indemnitee shall be entitled to the full benefits of such more favorable rights.

 

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16.                                Indemnification and Advancement Rights Primary .  The Corporation hereby acknowledges that Indemnitee has or may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more parties other than the Corporation or an affiliate of the Corporation (collectively, the “ Secondary Indemnitors ”).  The Corporation hereby acknowledges and the Corporation and Indemnitee hereby agree: (i) that the Corporation is the indemnitor of first resort; i.e., its obligations to Indemnitee are primary and any obligation of the Secondary Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary; (ii) that the Corporation shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Certificate of Incorporation and/or Bylaws of the Corporation (or any other agreement between the Corporation and Indemnitee), without regard to any rights Indemnitee may have against the Secondary Indemnitors; and (iii) that the Corporation irrevocably waives, relinquishes and releases the Secondary Indemnitors from any and all claims against the Secondary Indemnitors that the Corporation may have for contribution, subrogation or any other recovery of any kind in respect thereof.  The Corporation further agrees that no advancement or payment by the Secondary Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Corporation shall affect the foregoing and the Secondary Indemnitors shall have a right of contribution and/or subrogation to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Corporation.  The Corporation and Indemnitee agree that the Secondary Indemnitors are express third party beneficiaries of the terms of this provision.

 

17.                                Certain Definitions .

 

(a)                                  Agent ” shall mean any person who is or was, or who has consented to serve as, a director, officer, employee, agent, fiduciary, joint venturer, partner, manager or other official of the Corporation or a subsidiary or an affiliate of the Corporation, or any other entity (including without limitation, an employee benefit plan), in each case either at the request of, for the convenience of, or otherwise to benefit the Corporation or a subsidiary of the Corporation.  Any person who is or was serving as a director, officer, employee or agent of a subsidiary of the Corporation shall be deemed to be serving, or have served, at the request of the Corporation.

 

(b)                                  Change in Control ” shall mean the occurrence, after the Corporation’s initial public offering, of any of the following:

 

(i)                                      Both (A) any “person” (as defined below) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing at least twenty percent (20%) of the total voting power represented by the Corporation’s then outstanding voting securities and (B) the beneficial ownership by such person of securities representing such percentage is not approved by a majority of the “Continuing Directors” (as defined below);

 

(ii)                                   Any “person” is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing at least fifty percent (50%) of the total voting power represented by the Corporation’s then outstanding voting securities;

 

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(iii)                                A change in the composition of the Board of Directors occurs, as a result of which fewer than two-thirds of the incumbent directors are directors (the “ Continuing Directors ”) who either (A) had been directors of the Corporation on the “look-back date” (as defined below) (the “ Original Directors ”) or (B) were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority in the aggregate of the Original Directors who were still in office at the time of the election or nomination and directors whose election or nomination was previously so approved;

 

(iv)                               The stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, if such merger or consolidation would result in the voting securities of the Corporation outstanding immediately prior thereto representing (either by remaining outstanding or by being converted into voting securities of the surviving entity) 50% or less of the total voting power represented by the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; or

 

(v)                                  The stockholders of the Corporation approve (A) a plan of complete liquidation of the Corporation or (B) an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation’s assets.

 

For purposes of Subsections (i) and (ii) above, 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 (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or of a parent or subsidiary of the Corporation or (y) a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of the common stock of the Corporation.

 

For purposes of Subsection (iii) above, the term “ look-back date ” shall mean the later of (x) the date first written above in the preamble to this Agreement or (y) the date 24 months prior to the date of the event that may constitute a “Change in Control.”

 

Any other provision of this Section 17(b) notwithstanding, the term “Change in Control” shall not include a transaction, if undertaken at the election of the Corporation, the result of which is to sell all or substantially all of the assets of the Corporation to another corporation (the “surviving corporation”); provided that the surviving corporation is owned directly or indirectly by the stockholders of the Corporation immediately following such transaction in substantially the same proportions as their ownership of the Corporation’s common stock immediately preceding such transaction; and provided, further, that the surviving corporation expressly assumes this Agreement.

 

(c)                                   Disinterested Director ” shall mean a director of the Corporation who is not or was not a party to the Proceeding in respect of which indemnification is being sought by Indemnitee.

 

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(d)                                  Expenses ” shall include all direct and indirect costs (including, without limitation, attorneys’ fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all other disbursements or out-of-pocket expenses and reasonable compensation for time spent by Indemnitee for which Indemnitee is otherwise not compensated by the Corporation or any third party) actually and reasonably incurred in connection with either the investigation, defense, settlement or appeal of a Proceeding or establishing or enforcing a right to indemnification under this Agreement, applicable law or otherwise; provided , however , that “Expenses” shall not include any Liabilities.

 

(e)                                   Final Adverse Determination ” shall mean that a determination that Indemnitee is not entitled to indemnification shall have been made pursuant to Section 5 hereof and either (1) a final adjudication in the courts of the State of Delaware from which there is no further right of appeal or decision of an arbitrator pursuant to Section 8(a) hereof shall have denied Indemnitee’s right to indemnification hereunder, or (2) Indemnitee shall have failed to file a complaint in a Delaware court or seek an arbitrator’s award pursuant to Section 8(a) for a period of one hundred twenty (120) days after the determination made pursuant to Section 5 hereof.

 

(f)                                    Independent Legal Counsel ” shall mean a law firm or a member of a firm selected by the Corporation and approved by Indemnitee (which approval shall not be unreasonably withheld) or, if there has been a Change in Control, selected by Indemnitee and approved by the Corporation (which approval shall not be unreasonably withheld), that neither is presently nor in the past five (5) years has been retained to represent:  (i) the Corporation or any of its subsidiaries or affiliates, or Indemnitee or any corporation of which Indemnitee was or is a director, officer, employee or agent, or any subsidiary or affiliate of such a corporation, in any material matter, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Legal Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Corporation or Indemnitee in an action to determine Indemnitee’s right to indemnification under this Agreement.

 

(g)                                   Liabilities ” shall mean liabilities of any type whatsoever including, but not limited to, any judgments, fines, Employee Retirement Income Security Act excise taxes and penalties, penalties and amounts paid in settlement (including all interest assessments and other charges paid or payable in connection with or in respect of such judgments, fines, penalties or amounts paid in settlement) of any Proceeding.

 

(h)                                  Proceeding ” shall mean any threatened, pending or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party, as a witness or otherwise, that is associated with Indemnitee’s being an Agent of the Corporation.

 

18.                                Binding Effect; Duration and Scope of Agreement .  This Agreement shall be binding upon the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Corporation), spouses, heirs and personal and legal representatives.  This Agreement shall be deemed to be effective as of the commencement date of the Indemnitee’s service as an officer or director of the Corporation and shall continue in effect during the Indemnification Period, regardless of whether Indemnitee continues to serve as an Agent.

 

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19.                                Severability .  If any provision or provisions of this Agreement (or any portion thereof) shall be held to be invalid, illegal or unenforceable for any reason whatsoever:

 

(a)                                  the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby; and

 

(b)                                  to the fullest extent legally possible, the provisions of this Agreement shall be construed so as to give effect to the intent of any provision held invalid, illegal or unenforceable.

 

20.                                Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within the State of Delaware, without regard to conflict of laws rules.

 

21.                                Consent to Jurisdiction .  Except with respect to any arbitration commenced by Indemnitee pursuant to Section 8 of this Agreement, the Corporation and Indemnitee each irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding that arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

 

22.                                Entire Agreement .  This Agreement represents the entire agreement between the parties hereto, and there are no other agreements, contracts or understandings between the parties hereto with respect to the subject matter of this Agreement, except as specifically referred to herein or as provided in Section 15 hereof.

 

23.                                Counterparts .  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.

 

[* * *]

 

12



 

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by a duly authorized officer and Indemnitee has executed this Agreement as of the date first above written.

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By

 

 

Its

 

 

 

 

 

 

INDEMNITEE

 

 

 

 

 

Address:

 

 

 

 

 

13




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.

 

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.

 



 

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 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

 

i



 

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

 

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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.

 

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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.

 

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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

 

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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

 

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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.

 

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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

 

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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

 

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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 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

 

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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 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.                                      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.

 

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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.

 

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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

 

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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).

 

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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.                                      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

 

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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.

 

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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

 

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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

 

 

 

 

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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.

 

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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.

 

B-3




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

 

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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 (90 th ) 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 F The 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

 

7


 

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

 

A-1



 

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

 

A-2



 

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

 

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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

 

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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.

 

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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.

 

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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:

 

 

 

 

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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.

 

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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.

 

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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

 

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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

 

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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




Exhibit 10.5

 

INVITAE CORPORATION

 

2015 STOCK INCENTIVE PLAN

 

(Adopted by the Board of Directors on January      , 2015)
(Approved by the Stockholders on January    , 2015)

 



 

Table of Contents

 

 

 

Page

 

 

 

SECTION 1.

ESTABLISHMENT AND PURPOSE

1

 

 

 

SECTION 2.

DEFINITIONS

1

 

 

 

(a)

“Affiliate”

1

 

 

 

(b)

“Award”

1

 

 

 

(c)

“Award Agreement”

1

 

 

 

(d)

“Board of Directors” or “Board”

1

 

 

 

(e)

“Cash-Based Award”

1

 

 

 

(f)

“Change in Control”

1

 

 

 

(g)

“Code”

3

 

 

 

(h)

“Committee”

3

 

 

 

(i)

“Company”

3

 

 

 

(j)

“Consultant”

3

 

 

 

(k)

“Employee”

3

 

 

 

(l)

“Exchange Act”

3

 

 

 

(m)

“Exercise Price”

3

 

 

 

(n)

“Fair Market Value”

3

 

 

 

(o)

“ISO”

4

 

 

 

(p)

“Nonstatutory Option”

4

 

 

 

(q)

“Option”

4

 

 

 

(r)

“Outside Director”

4

 

 

 

(s)

“Parent”

4

 

 

 

(t)

“Participant”

4

 

 

 

(u)

“Performance Based Award”

4

 

 

 

(v)

“Plan”

4

 

 

 

(w)

“Purchase Price”

4

 

 

 

(x)

“Restricted Share”

4

 

 

 

(y)

“SAR”

4

 

 

 

(z)

“Service”

4

 

 

 

(aa)

“Share”

5

 

INVITAE CORPORATION

2015 STOCK INCENTIVE PLAN

 

i



 

(bb)

“Stock”

5

 

 

 

(cc)

“Stock Unit”

5

 

 

 

(dd)

“Subsidiary”

5

 

 

 

(ee)

“Total and Permanent Disability”

5

 

 

 

SECTION 3.

ADMINISTRATION

5

 

 

 

(a)

Committee Composition

5

 

 

 

(b)

Committee for Non-Officer Grants

5

 

 

 

(c)

Committee Procedures

6

 

 

 

(d)

Committee Responsibilities

6

 

 

 

SECTION 4.

ELIGIBILITY

7

 

 

 

(a)

General Rule

7

 

 

 

(b)

Ten-Percent Stockholders

7

 

 

 

(c)

Attribution Rules

7

 

 

 

(d)

Outstanding Stock

7

 

 

 

SECTION 5.

STOCK SUBJECT TO PLAN

8

 

 

 

(a)

Basic Limitation

8

 

 

 

(b)

Section 162(m) Award Limitation

8

 

 

 

(c)

Additional Shares

9

 

 

 

(d)

Substitution and Assumption of Awards

9

 

 

 

SECTION 6.

RESTRICTED SHARES

9

 

 

 

(a)

Restricted Share Award Agreement

9

 

 

 

(b)

Payment for Awards

9

 

 

 

(c)

Vesting

9

 

 

 

(d)

Voting and Dividend Rights

9

 

 

 

(e)

Restrictions on Transfer of Shares

10

 

 

 

SECTION 7.

TERMS AND CONDITIONS OF OPTIONS

10

 

 

 

(a)

Stock Option Award Agreement

10

 

 

 

(b)

Number of Shares

10

 

 

 

(c)

Exercise Price

10

 

 

 

(d)

Withholding Taxes

10

 

 

 

(e)

Exercisability and Term

10

 

 

 

(f)

Exercise of Options

11

 

INVITAE CORPORATION

2015 STOCK INCENTIVE PLAN

 

ii



 

(g)

Effect of Change in Control

11

 

 

 

(h)

No Rights as a Stockholder

11

 

 

 

(i)

Modification, Extension and Renewal of Options

11

 

 

 

(j)

Restrictions on Transfer of Shares

11

 

 

 

(k)

Buyout Provisions

11

 

 

 

SECTION 8.

PAYMENT FOR SHARES

12

 

 

 

(a)

General Rule

12

 

 

 

(b)

Surrender of Stock

12

 

 

 

(c)

Services Rendered

12

 

 

 

(d)

Cashless Exercise

12

 

 

 

(e)

Exercise/Pledge

12

 

 

 

(f)

Net Exercise

12

 

 

 

(g)

Promissory Note

12

 

 

 

(h)

Other Forms of Payment

12

 

 

 

(i)

Limitations under Applicable Law

13

 

 

 

SECTION 9.

STOCK APPRECIATION RIGHTS

13

 

 

 

(a)

SAR Award Agreement

13

 

 

 

(b)

Number of Shares

13

 

 

 

(c)

Exercise Price

13

 

 

 

(d)

Exercisability and Term

13

 

 

 

(e)

Effect of Change in Control

13

 

 

 

(f)

Exercise of SARs

13

 

 

 

(g)

Modification or Assumption of SARs

14

 

 

 

(h)

Buyout Provisions

14

 

 

 

SECTION 10.

STOCK UNITS

14

 

 

 

(a)

Stock Unit Award Agreement

14

 

 

 

(b)

Payment for Awards

14

 

 

 

(c)

Vesting Conditions

14

 

 

 

(d)

Voting and Dividend Rights

14

 

 

 

(e)

Form and Time of Settlement of Stock Units

14

 

 

 

(f)

Death of Participant

15

 

 

 

(g)

Creditors’ Rights

15

 

INVITAE CORPORATION

2015 STOCK INCENTIVE PLAN

 

iii



 

SECTION 11.

CASH-BASED AWARDS

15

 

 

 

SECTION 12.

ADJUSTMENT OF SHARES

15

 

 

 

(a)

Adjustments

15

 

 

 

(b)

Dissolution or Liquidation

16

 

 

 

(c)

Reorganizations

16

 

 

 

(d)

Reservation of Rights

16

 

 

 

SECTION 13.

DEFERRAL OF AWARDS

17

 

 

 

(a)

Committee Powers

17

 

 

 

(b)

General Rules

17

 

 

 

SECTION 14.

AWARDS UNDER OTHER PLANS

18

 

 

 

SECTION 15.

PAYMENT OF DIRECTOR’S FEES IN SECURITIES

18

 

 

 

(a)

Effective Date

18

 

 

 

(b)

Elections to Receive NSOs, SARs, Restricted Shares or Stock Units

18

 

 

 

(c)

Number and Terms of NSOs, SARs, Restricted Shares or Stock Units

18

 

 

 

SECTION 16.

LEGAL AND REGULATORY REQUIREMENTS

18

 

 

 

SECTION 17.

TAXES

18

 

 

 

(a)

Withholding Taxes

18

 

 

 

(b)

Share Withholding

19

 

 

 

(c)

Section 409A

19

 

 

 

SECTION 18.

TRANSFERABILITY

19

 

 

 

SECTION 19.

PERFORMANCE BASED AWARDS

19

 

 

 

SECTION 20.

NO EMPLOYMENT RIGHTS

21

 

 

 

SECTION 21.

DURATION AND AMENDMENTS

21

 

 

 

(a)

Term of the Plan

21

 

 

 

(b)

Right to Amend the Plan

21

 

 

 

(c)

Effect of Termination

22

 

 

 

SECTION 22.

EXECUTION

23

 

INVITAE CORPORATION

2015 STOCK INCENTIVE PLAN

 

iv



 

INVITAE CORPORATION

 

2015 STOCK INCENTIVE PLAN

 

SECTION 1.  ESTABLISHMENT AND PURPOSE.

 

The Plan was adopted by the Board of Directors on January    , 2015, and shall be effective immediately prior to the closing of the initial offering of Stock to the public pursuant to a registration statement filed by the Company with the Securities and Exchange Commission (the “Effective Date”). The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of restricted shares, stock units, options (which may constitute incentive stock options or nonstatutory stock options), stock appreciation rights or cash-based awards.

 

SECTION 2.  DEFINITIONS.

 

(a)            “Affiliate” shall mean any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.

 

(b)            “Award” shall mean any award of an Option, a SAR, a Restricted Share or a Stock Unit or a Cash-Based Award under the Plan.

 

(c)                                   “Award Agreement” shall mean the agreement between the Company and the recipient of an Award which contains the terms, conditions and restrictions pertaining to such Award.

 

(d)            “Board of Directors” or “Board” shall mean the Board of Directors of the Company, as constituted from time to time.

 

(e)            “Cash-Based Award” shall mean an Award that entitles the Participant to receive a cash-denominated payment.

 

(f)             “Change in Control” shall mean the occurrence of any of the following events:

 

(i)                                      A change in the composition of the Board of Directors occurs, as a result of which fewer than one-half of the incumbent directors are directors who either:

 

(A)                                Had been directors of the Company on the “look-back date” (as defined below) (the “original directors”); or

 

(B)                                Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the aggregate of

 

INVITAE CORPORATION

2015 STOCK INCENTIVE PLAN

 

1



 

the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved (the “continuing directors”);

 

provided, however, that for this purpose, the “original directors” and “continuing directors” shall not include any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

 

(ii)                                   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 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 “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; or

 

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

 

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

 

For purposes of subsection (e)(i) above, the term “look-back” date shall mean the later of (1) the Effective Date or (2) the date 24 months prior to the date of the event that may constitute a Change in Control.

 

For purposes of subsection (e)(ii)) above, 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.

 

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Any other provision of this Section 2(e) notwithstanding, a transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction, and a Change in Control shall not be deemed to occur if the Company files a registration statement with the United States Securities and Exchange Commission for the initial or secondary public offering of securities or debt of the Company to the public.

 

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

 

(h)            “Committee” shall mean the Compensation Committee as designated by the Board of Directors, which is authorized to administer the Plan, as described in Section 3 hereof.

 

(i)             “Company” shall mean Invitae Corporation, a Delaware corporation.

 

(j)             “Consultant” shall mean a consultant or advisor who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor (not including service as a member of the Board of Directors) or a member of the board of directors of a Parent or a Subsidiary, in each case who is not an Employee.

 

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

 

(l)             “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(m)           “Exercise Price” shall mean, in the case of an Option, the amount for which one Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of a SAR, shall mean an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Share in determining the amount payable upon exercise of such SAR.

 

(n)            “Fair Market Value” with respect to a Share, shall mean the market price of one Share, determined by the Committee as follows:

 

(i)                                      If the Stock was traded over-the-counter on the date in question, then the Fair Market Value shall be equal to the last transaction price quoted for such date by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the Stock is quoted or, if the Stock is not quoted on any such system, by the Pink Quote system;

 

(ii)                                   If the Stock was traded on any established stock exchange (such as the New York Stock Exchange, The Nasdaq Global Market or The Nasdaq Global Select Market) or national market system on the date in question, then the Fair Market Value shall be equal to the closing price reported for such date by the applicable exchange or system; and

 

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(iii)                                If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate.

 

In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons.

 

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

 

(p)            “Nonstatutory Option” or “NSO” shall mean an employee stock option that is not an ISO.

 

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

 

(r)             “Outside Director” shall mean a member of the Board of Directors who is not a common-law employee of, or paid consultant to, the Company, a Parent or a Subsidiary.

 

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

 

(t)             “Participant” shall mean a person who holds an Award.

 

(u)                                  “Performance Based Award” shall mean any Restricted Share Award, Stock Unit Award or Cash-Based Award granted to a Participant that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

 

(v)            “Plan” shall mean this 2015 Stock Incentive Plan of Invitae Corporation, as amended from time to time.

 

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

 

(x)            “Restricted Share” shall mean a Share awarded under the Plan.

 

(y)            “SAR” shall mean a stock appreciation right granted under the Plan.

 

(z)             “Service” shall mean service as an Employee, Consultant or Outside Director, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement.  Service does not terminate when an Employee goes on a bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law.  However, for purposes of determining whether an Option is entitled to ISO status, an Employee’s employment will be treated as terminating three months after such Employee went on leave,

 

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unless such Employee’s right to return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work.  The Company determines which leaves of absence count toward Service, and when Service terminates for all purposes under the Plan.

 

(aa)          “Share” shall mean one share of Stock, as adjusted in accordance with Section 12 (if applicable).

 

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

 

(cc)          “Stock Unit” shall mean a bookkeeping entry representing the Company’s obligation to deliver one Share (or distribute cash) on a future date in accordance with the provisions of a Stock Unit Award Agreement.

 

(dd)          “Subsidiary” shall mean any corporation, if the Company and/or one or more other Subsidiaries own not less than 50% of the total combined voting power of all classes of outstanding stock of such corporation. 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.

 

(ee)          “Total and Permanent Disability” shall mean any permanent and total disability as defined by Section 22(e)(3) of the Code.

 

SECTION 3.  ADMINISTRATION.

 

(a)                                  Committee Composition .  The Plan shall be administered by a Committee appointed by the Board, or by the Board acting as the Committee. The Committee shall consist of two or more directors of the Company. In addition, to the extent required by the Board, the composition of the Committee shall satisfy (i) such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and (ii) such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under Section 162(m)(4)(C) of the Code.

 

(b)                                  Committee for Non-Officer Grants .  The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not satisfy the requirements of Section 3(a), who may administer the Plan with respect to Employees who are not considered officers or directors of the Company under Section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and may determine all terms of such grants. Within the limitations of the preceding sentence, any reference in the Plan to the Committee shall include such committee or committees appointed pursuant to the preceding sentence. To the extent permitted by applicable laws, the Board of Directors may also authorize one or more officers of the Company to designate Employees, other than officers under Section 16 of the Exchange Act, to receive Awards and/or to determine the number of such Awards to be received by such persons; provided, however, that the Board of Directors shall specify the total number of Awards that such officers may so award.

 

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(c)                                   Committee Procedures .  The Board of Directors shall designate one of the members of the Committee as chairman. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing (including via email) by all Committee members, shall be valid acts of the Committee.

 

(d)                                  Committee Responsibilities .  Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take the following actions:

 

(i)                                      To interpret the Plan and to apply its provisions;

 

(ii)                                   To adopt, amend or rescind rules, procedures and forms relating to the Plan;

 

(iii)                                To adopt, amend or terminate sub-plans established for the purpose of satisfying applicable foreign laws including qualifying for preferred tax treatment under applicable foreign tax laws;

 

(iv)                               To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;

 

(v)                                  To determine when Awards are to be granted under the Plan;

 

(vi)                               To select the Participants to whom Awards are to be granted;

 

(vii)                            To determine the type of Award and number of Shares or amount of cash to be made subject to each Award;

 

(viii)                         To prescribe the terms and conditions of each Award, including (without limitation) the Exercise Price and Purchase Price, and the vesting or duration of the Award (including accelerating the vesting of Awards, either at the time of the Award or thereafter, without the consent of the Participant), to determine whether an Option is to be classified as an ISO or as a Nonstatutory Option, and to specify the provisions of the agreement relating to such Award;

 

(ix)                               To amend any outstanding Award Agreement, subject to applicable legal restrictions and to the consent of the Participant if the Participant’s rights or obligations would be materially impaired;

 

(x)                                  To prescribe the consideration for the grant of each Award or other right under the Plan and to determine the sufficiency of such consideration;

 

(xi)                               To determine the disposition of each Award or other right under the Plan in the event of a Participant’s divorce or dissolution of marriage;

 

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(xii)                            To determine whether Awards under the Plan will be granted in replacement of other grants under an incentive or other compensation plan of an acquired business;

 

(xiii)                         To correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award Agreement;

 

(xiv)                        To establish or verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; and

 

(xv)                           To take any other actions deemed necessary or advisable for the administration of the Plan.

 

Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Awards under the Plan to persons subject to Section 16 of the Exchange Act.  All decisions, interpretations and other actions of the Committee shall be final and binding on all Participants and all persons deriving their rights from a Participant.  No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan or any Award under the Plan.

 

SECTION 4.  ELIGIBILITY.

 

(a)                                  General Rule .  Only Employees, Consultants and Outside Directors shall be eligible for the grant of Awards.  Only common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs.

 

(b)                                  Ten-Percent Stockholders .  An Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, a Parent or Subsidiary shall not be eligible for the grant of an ISO unless such grant satisfies the requirements of Section 422(c)(5) of the Code.

 

(c)                                   Attribution Rules .  For purposes of Section 4(c) above, in determining stock ownership, an Employee shall be deemed to own the stock owned, directly or indirectly, by or for such Employee’s brothers, sisters, spouse, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be deemed to be owned proportionately by or for its stockholders, partners or beneficiaries.

 

(d)                                  Outstanding Stock .  For purposes of Section 4(c) above, “outstanding stock” shall include all stock actually issued and outstanding immediately after the grant. “Outstanding stock” shall not include shares authorized for issuance under outstanding options held by the Employee or by any other person.

 

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SECTION 5.  STOCK SUBJECT TO PLAN.

 

(a)            Basic Limitation .  Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares.  The aggregate number of Shares authorized for issuance as Awards under the Plan shall not exceed the sum of (x) 25,500,000 Shares(1), plus (y) the sum of the number of Shares subject to outstanding awards under the Company’s 2010 Stock Plan (the “Predecessor Plan”) on the 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 Predecessor Plan on the Effective Date that are subsequently forfeited, plus the number of reserved Shares not issued or subject to outstanding grants under the Predecessor Plan on the Effective Date, plus (z) an annual increase on the first day of each fiscal year, for a period of not more than ten years, beginning on January 1, 2016, and ending on (and including) January 1, 2025, in an amount equal to the lesser of (i) four percent (4%) of the outstanding Shares on the last day of the immediately preceding fiscal or (ii) if the Board acts prior to the first day of the fiscal year, such lesser amount (including zero) that the Board determines for purposes of the annual increase for that fiscal year.  Notwithstanding the foregoing, the number of Shares that may be delivered in the aggregate pursuant to the exercise of ISOs granted under the Plan shall not exceed 101,000,000 Shares(2) plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that become available for issuance under the Plan pursuant to Section 5(c).  The limitations of this Section 5(a) shall be subject to adjustment pursuant to Section 12. The number of Shares that are subject to Awards outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.

 

(b)            Section 162(m) Award Limitation .  Notwithstanding any contrary provisions of the Plan, and subject to the provisions of Section 12, during any time when the transition period relief under Treasury Regulation Section 1.162-27(f)(2) has lapsed or does not apply, and with respect to any Option or SAR intended to qualify as “performance-based compensation” under Section 162(m) of the Code, no Participant eligible for an Award may receive Options or SARs under the Plan in any calendar year that relate to an aggregate of more than 12,000,000 Shares(3), and no more than two times this amount in the first year of employment.  To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation with respect to a Participant, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Participant.  For this purpose, the repricing of an Option or SAR shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.

 


(1)  Note:  For clarity, this is a pre-split number that will be adjusted proportionately to reflect the reverse stock split implemented by the Company in advance of the consummation of the Company’s IPO.

(2)  Note:  For clarity, this is a pre-split number that will be adjusted proportionately to reflect the reverse stock split implemented by the Company in advance of the consummation of the Company’s IPO.

(3)  Note:  For clarity, this is a pre-split number that will be adjusted proportionately to reflect the reverse stock split implemented by the Company in advance of the consummation of the Company’s IPO.

 

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(c)            Additional Shares .  If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such Shares shall again become available for Awards under the Plan. If Stock Units, Options or SARs are forfeited or terminate for any reason before being exercised or settled, or an Award is settled in cash without the delivery of Shares to the holder, then any Shares subject to the Award shall again become available for Awards under the Plan.  Only the number of Shares (if any) actually issued in settlement of Awards (and not forfeited) shall reduce the number available in Section 5(a) and the balance shall again become available for Awards under the Plan.  Any Shares withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again become available for Awards under the Plan.  Notwithstanding the foregoing provisions of this Section 5(c), Shares that have actually been issued shall not again become available for Awards under the Plan, except for Shares that are forfeited and do not become vested.

 

(d)            Substitution and Assumption of Awards .  The Committee may make Awards under the Plan by assumption, substitution or replacement of stock options, stock appreciation rights, stock units or similar awards granted by another entity (including a Parent or Subsidiary), if such assumption, substitution or replacement is in connection with an asset acquisition, stock acquisition, merger, consolidation or similar transaction involving the Company (and/or its Parent or Subsidiary) and such other entity (and/or its affiliate).  The terms of such assumed, substituted or replaced Awards shall be as the Committee, in its discretion, determines is appropriate.  Any such substitute or assumed Awards shall not count against the Share limitation set forth in Section 5(a).

 

SECTION 6.  RESTRICTED SHARES.

 

(a)            Restricted Share Award Agreement . Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Share Award Agreement between the Participant and the Company.  Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Restricted Share Award Agreements entered into under the Plan need not be identical.

 

(b)            Payment for Awards .  Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services.

 

(c)            Vesting .  Each Award of Restricted Shares may or may not be subject to vesting.  Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Share Award Agreement. A Restricted Share Award Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events.  The Committee may determine, at the time of granting Restricted Shares or thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company.

 

(d)            Voting and Dividend Rights .  The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders. A Restricted Share Award Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares.  Such additional

 

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Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid.

 

(e)            Restrictions on Transfer of Shares .  Restricted Shares shall be subject to such rights of repurchase, rights of first refusal or other restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Restricted Share Award Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.

 

SECTION 7.  TERMS AND CONDITIONS OF OPTIONS.

 

(a)            Stock Option Award Agreement .  Each grant of an Option under the Plan shall be evidenced by a Stock Option Award Agreement between the Participant and the Company.  Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Award Agreement. The Stock Option Award Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Award Agreements entered into under the Plan need not be identical.

 

(b)            Number of Shares .  Each Stock Option Award 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 12.

 

(c)            Exercise Price .  Each Stock Option Award Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant, except as otherwise provided in 4(c), and the Exercise Price of an NSO shall not be less 100% of the Fair Market Value of a Share on the date of grant.  Notwithstanding the foregoing, Options may be granted with an Exercise Price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.  Subject to the foregoing in this Section 7(c), the Exercise Price under any Option shall be determined by the Committee in its sole discretion. The Exercise Price shall be payable in one of the forms described in Section 8.

 

(d)            Withholding Taxes .  As a condition to the exercise of an Option, the Participant shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Participant shall also make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option.

 

(e)            Exercisability and Term .  Each Stock Option Award Agreement shall specify the date when all or any installment of the Option is to become exercisable. The Stock Option Award Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant (five years for ISOs granted to Employees described in Section 4(c)). A Stock Option Award Agreement may provide for accelerated exercisability in the event of the Participant’s death, disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s Service. Options may be awarded in combination with SARs, and such an

 

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Award may provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to the foregoing in this Section 7(e), the Committee at its sole discretion shall determine when all or any installment of an Option is to become exercisable and when an Option is to expire.

 

(f)             Exercise of Options .  Each Stock Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s Service with the Company and its Subsidiaries, and the right to exercise the Option of any executors or administrators of the Participant’s estate or any person who has acquired such Option(s) directly from the Participant by bequest or inheritance. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.

 

(g)            Effect of Change in Control .  The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company.

 

(h)            No Rights as a Stockholder .  A Participant shall have no rights as a stockholder with respect to any Shares covered by his Option until the date of the issuance of a stock certificate for such Shares. No adjustments shall be made, except as provided in Section 12.

 

(i)             Modification, Extension and Renewal of Options .  Within the limitations of the Plan, the Committee 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, or in return for the grant of a different Award for the same or a different number of Shares, without stockholder approval. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Participant, materially impair his or her rights or obligations under such Option.

 

(j)             Restrictions on Transfer of Shares .  Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Option Award Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.

 

(k)            Buyout Provisions .  The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (b) authorize a Participant to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

 

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SECTION 8.  PAYMENT FOR SHARES.

 

(a)            General Rule .  The entire Exercise Price or Purchase Price of Shares issued under the Plan shall be payable in lawful money of the United States of America at the time when such Shares are purchased, except as provided in Section 8(b) through Section 8(h) below.

 

(b)            Surrender of Stock .  To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by surrendering, or attesting to the ownership of, Shares which have already been owned by the Participant or his representative.  Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan.  The Participant shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.

 

(c)            Services Rendered .  At the discretion of the Committee, Shares may be awarded under the Plan in consideration of services rendered to the Company or a Subsidiary.  If Shares are awarded without the payment of a Purchase Price in cash, the Committee shall make a determination (at the time of the Award) of the value of the services rendered by the Participant and the sufficiency of the consideration to meet the requirements of Section 6(b).

 

(d)            Cashless Exercise .  To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) 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.

 

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

 

(f)             Net Exercise .  To the extent that a Stock Option Award Agreement so provides, by a “net exercise” arrangement pursuant to which the number of Shares issuable upon exercise of the Option shall be reduced by the largest whole number of Shares having an aggregate Fair Market Value that does not exceed the aggregate exercise price (plus tax withholdings, if applicable) and any remaining balance of the aggregate exercise price (and/or applicable tax withholdings) not satisfied by such reduction in the number of whole Shares to be issued shall be paid by the Optionee in cash other form of payment permitted under the Stock Option Agreement.

 

(g)            Promissory Note .  To the extent that a Stock Option Award Agreement or Restricted Share Award Agreement so provides, payment may be made all or in part by delivering (on a form prescribed by the Company) a full-recourse promissory note.

 

(h)            Other Forms of Payment .  To the extent that a Stock Option Award Agreement or Restricted Share Award Agreement so provides, payment may be made in any other form that is consistent with applicable laws, regulations and rules.

 

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(i)             Limitations under Applicable Law .  Notwithstanding anything herein or in a Stock Option Award Agreement or Restricted Share Award Agreement to the contrary, payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion.

 

SECTION 9.  STOCK APPRECIATION RIGHTS.

 

(a)            SAR Award Agreement .  Each grant of a SAR under the Plan shall be evidenced by a SAR Award Agreement between the Participant and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Award Agreements entered into under the Plan need not be identical.

 

(b)            Number of Shares .  Each SAR Award Agreement shall specify the number of Shares to which the SAR pertains and shall provide for the adjustment of such number in accordance with Section 12.

 

(c)            Exercise Price .  Each SAR Award Agreement shall specify the Exercise Price.  The Exercise Price of a SAR shall not be less than 100% of the Fair Market Value of a Share on the date of grant.  Notwithstanding the foregoing, SARs may be granted with an Exercise Price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.  Subject to the foregoing in this Section 9(c), the Exercise Price under any SAR shall be determined by the Committee in its sole discretion.

 

(d)            Exercisability and Term .  Each SAR Award Agreement shall specify the date when all or any installment of the SAR is to become exercisable.  The SAR Award Agreement shall also specify the term of the SAR.  A SAR Award Agreement may provide for accelerated exercisability in the event of the Participant’s death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s service.  SARs may be awarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited.  A SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.

 

(e)            Effect of Change in Control .  The Committee may determine, at the time of granting a SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company.

 

(f)             Exercise of SARs .  Upon exercise of a SAR, the Participant (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Shares, (b) cash or (c) a combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price.

 

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(g)            Modification or Assumption of SARs .  Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs 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, without stockholder approval. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the holder, materially impair his or her rights or obligations under such SAR.

 

(h)            Buyout Provisions .  The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents a SAR previously granted, or (b) authorize a Participant to elect to cash out a SAR previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

 

SECTION 10.  STOCK UNITS.

 

(a)            Stock Unit Award Agreement .  Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Award Agreement between the Participant and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Award Agreements entered into under the Plan need not be identical.

 

(b)            Payment for Awards .  To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.

 

(c)            Vesting Conditions .  Each Award of Stock Units may or may not be subject to vesting.  Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Award Agreement. A Stock Unit Award Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company.

 

(d)            Voting and Dividend Rights .  The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents.  Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Stock Unit is outstanding.  Dividend equivalents may be converted into additional Stock Units.  Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both.  Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions (including without limitation, any forfeiture conditions) as the Stock Units to which they attach.

 

(e)            Form and Time of Settlement of Stock Units .  Settlement of vested Stock Units may be made in the form of (a) cash, (b) Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. 

 

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Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days.  A Stock Unit Award Agreement may provide that vested Stock Units may be settled in a lump sum or in installments.  A Stock Unit Award Agreement may provide that the distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date, subject to compliance with Section 409A of the Code.  The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents.  Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 12.

 

(f)             Death of Participant .  Any Stock Unit Award that becomes payable after the Participant’s death shall be distributed to the Participant’s beneficiary or beneficiaries.  Each recipient of a Stock Unit Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company.  A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death.  If no beneficiary was designated or if no designated beneficiary survives the Participant, then any Stock Units Award that becomes payable after the Participant’s death shall be distributed to the Participant’s estate.

 

(g)            Creditors’ Rights .  A holder of Stock Units shall have no rights other than those of a general creditor of the Company.  Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Award Agreement.

 

SECTION 11.  CASH-BASED AWARDS

 

The Committee may, in its sole discretion, grant Cash-Based Awards to any Participant in such number or amount and upon such terms, and subject to such conditions, as the Committee shall determine at the time of grant and specify in an applicable Award Agreement.  The Committee shall determine the maximum duration of the Cash-Based Award, the amount of cash which may be payable pursuant to the Cash-Based Award, the conditions upon which the Cash-Based Award shall become vested or payable, and such other provisions as the Committee shall determine.  Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Committee.  Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash or in shares of Stock, as the Committee determines.

 

SECTION 12.  ADJUSTMENT OF SHARES.

 

(a)            Adjustments .  In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make appropriate and equitable adjustments in:

 

(i)                                      The number of Shares available for future Awards under Section 5;

 

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(ii)                                   The limitations set forth in Sections 5(a) and (b) and Section 19;

 

(iii)                                The number of Shares covered by each outstanding Award; and

 

(iv)                               The Exercise Price under each outstanding Option and SAR.

 

(b)            Dissolution or Liquidation .  To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.

 

(c)            Reorganizations .  In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Subject to compliance with Section 409A of the Code, such agreement shall provide for:

 

(i)                                      The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation;

 

(ii)                                   The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary;

 

(iii)                                The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards;

 

(iv)                               Immediate vesting, exercisability and settlement of outstanding Awards followed by the cancellation of such Awards upon or immediately prior to the effectiveness of such transaction; or

 

(v)                                  Settlement of the intrinsic value of the outstanding Awards (whether or not then vested or 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 Awards or the underlying Shares) followed by the cancellation of such Awards (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment); in each case without the Participant’s consent.  Any acceleration of payment of an amount that is subject to section 409A of the Code will be delayed, if necessary, until the earliest time that such payment would be permissible under Section 409A without triggering any additional taxes applicable under Section 409A.

 

The Company will have no obligation to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.

 

(d)            Reservation of Rights .  Except as provided in this Section 12, a Participant shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the

 

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payment of any dividend or any other increase or decrease in the number of shares of stock of any class.  Any issue 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 Award. The grant of an Award 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.  In the event of any change affecting the Shares or the Exercise Price of Shares subject to an Award, including a merger or other reorganization, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of up to thirty (30) days prior to the occurrence of such event.

 

SECTION 13.  DEFERRAL OF AWARDS.

 

(a)            Committee Powers .  Subject to compliance with Section 409A of the Code, the Committee (in its sole discretion) may permit or require a Participant to:

 

(i)                                      Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books;

 

(ii)                                   Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or

 

(iii)                                Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of such Shares as of the date when they otherwise would have been delivered to such Participant.

 

(b)            General Rules .  A deferred compensation account established under this Section 13 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 13.

 

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SECTION 14.  AWARDS UNDER OTHER PLANS.

 

The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under this Plan. Such Shares shall be treated for all purposes under the Plan like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Shares available under Section 5.

 

SECTION 15.  PAYMENT OF DIRECTOR’S FEES IN SECURITIES.

 

(a)            Effective Date .  No provision of this Section 15 shall be effective unless and until the Board has determined to implement such provision.

 

(b)            Elections to Receive NSOs, SARs, Restricted Shares or Stock Units .  An Outside Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, SARs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board.  Alternatively, the Board may mandate payment in any of such alternative forms.  Such NSOs, SARs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Section 15 shall be filed with the Company on the prescribed form.

 

(c)            Number and Terms of NSOs, SARs, Restricted Shares or Stock Units .  The number of NSOs, SARs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The terms of such NSOs, SARs, Restricted Shares or Stock Units shall also be determined by the Board.

 

SECTION 16.  LEGAL AND REGULATORY REQUIREMENTS.

 

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 of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations and the regulations of any stock exchange on which the Company’s securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or advisable. The Company shall not be liable to a Participant or other persons as to: (a) the non-issuance or sale of Shares as to which the Company has not obtained from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares under the Plan; and (b) any tax consequences expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Award granted under the Plan.

 

SECTION 17.  TAXES.

 

(a)            Withholding Taxes .  To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the

 

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Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.

 

(b)            Share Withholding .  The Committee may permit a Participant 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 otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may a Participant have Shares withheld that would otherwise be issued to him or her in excess of the number necessary to satisfy the minimum legally required tax withholding.

 

(c)            Section 409A .  Each Award that provides for “nonqualified deferred compensation” within the meaning of Section 409A of the Code shall be subject to such additional rules and requirements as specified by the Committee from time to time in order to comply with Section 409A.  If any amount under such an Award is payable upon a “separation from service” (within the meaning of Section 409A) to a Participant who is then considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the Participant’s separation from service, or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A.  In addition, the settlement of any such Award may not be accelerated except to the extent permitted by Section 409A.

 

SECTION 18.  TRANSFERABILITY.

 

Unless the agreement evidencing an Award (or an amendment thereto authorized by the Committee) expressly provides otherwise, no Award granted under this Plan, nor any interest in such Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise 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 ISO may be transferred or assigned only to the extent consistent with Section 422 of the Code. Any purported assignment, transfer or encumbrance in violation of this Section 18 shall be void and unenforceable against the Company.

 

SECTION 19.  PERFORMANCE BASED AWARDS.

 

The number of Shares or other benefits granted, issued, retainable and/or vested under an Award may be made subject to the attainment of performance goals.  The Committee may utilize any performance criteria selected by it in its sole discretion to establish performance goals; provided, however, that in the case of any Performance Based Award, the following conditions shall apply:

 

(i)                                      The amount potentially available under a Performance Based Award shall be subject to the attainment of pre-established, objective performance goals relating to a specified period of service based on one or more of the following performance criteria: (a) cash flow, (b) earnings per share, (c) earnings before interest, taxes and amortization, (d) return on equity, (e) 

 

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2015 STOCK INCENTIVE PLAN

 

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total stockholder return, (f) share price performance, (g) return on capital, (h) return on assets or net assets, (i) revenue, (j) income or net income, (k) operating income or net operating income, (l) operating profit or net operating profit, (m) operating margin or profit margin, (n) return on operating revenue, (o) return on invested capital, (p) market segment shares, (q) costs, (r) expenses, (s) initiation or completion of research activities, (t) initiation or completion of development programs, (u) other milestones with respect to research activities or development programs, (v) regulatory body approval, (w) implementation or completion of critical projects, (x) commercial milestones or (z) other milestones with respect to the growth of the Company’s business or the development or commercialization of any product or service (“Qualifying Performance Criteria”), any of which may be measured either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group or index, in each case as specified by the Committee in the Award;

 

(ii)                                   Unless specified otherwise by the Committee at the time the performance goals are established or otherwise within the time prescribed by Section 162(m) of the Code, the Committee shall appropriately adjust the method of evaluating performance under a Qualifying Performance Criteria for a performance period as follows: (i) to exclude asset write-downs, (ii) to exclude litigation or claim judgments or settlements, (iii) to exclude the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) to exclude accruals for reorganization and restructuring programs, (v) to exclude any extraordinary nonrecurring items as determined under generally accepted accounting principles and/or described in managements’ discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, (vi) to exclude the dilutive effects of acquisitions or joint ventures, (vii) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture, (viii) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends, (ix) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; and (x) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed

 

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under generally accepted accounting principles, in each case in compliance with Section 162(m);

 

(iii)                                The Committee shall establish the applicable performance goals in writing and an objective method for determining the Award earned by a Participant if the goals are attained, while the outcome is substantially uncertain and not later than the 90 th  day of the performance period (but in no event after 25% of the period of service with respect to which the performance goals relate has elapsed), and shall determine and certify in writing, for each Participant, the extent to which the performance goals have been met prior to payment or vesting of the Award;

 

(iv)                               The Committee may not in any event increase the amount of compensation payable under the Plan upon the attainment of the pre-established performance goals to a Participant who is a “covered employee” within the meaning of Section 162(m) of the Code; and

 

(v)                                  The maximum aggregate number of Shares that may be subject to Performance Based Awards granted to a Participant in any calendar year is 12,000,000 Shares(4), and no more than two times this amount in the first year of employment (subject to adjustment under Section 12), and the maximum aggregate amount of cash that may be payable to a Participant under Performance Based Awards granted to a Participant in any calendar year that are Cash-Based Awards is $10,000,000.

 

SECTION 20.  NO EMPLOYMENT RIGHTS.

 

No provision of the Plan, nor any Award granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee or Consultant. The Company and its Subsidiaries reserve the right to terminate any person’s Service at any time and for any reason, with or without notice.

 

SECTION 21.  DURATION AND AMENDMENTS.

 

(a)            Term of the Plan .  The Plan, as set forth herein, shall come into existence on the date of its adoption by the Board of Directors; provided, however, that no Award may be granted hereunder prior to the Effective Date.  The Board of Directors may suspend or terminate the Plan at any time.  No ISOs may be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board of Directors, or (ii) the date the Plan is approved the stockholders of the Company.

 

(b)            Right to Amend the Plan .  The Board of Directors may amend the Plan at any time and from time to time. Rights and obligations under any Award granted before amendment of the Plan shall not be materially impaired by such amendment, except with consent of the Participant.

 


(4)  Note:  For clarity, this is a pre-split number that will be adjusted proportionately to reflect the reverse stock split implemented by the Company in advance of the consummation of the Company’s IPO.

 

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2015 STOCK INCENTIVE PLAN

 

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An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.

 

(c)            Effect of Termination .  No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan shall not affect Awards previously granted under the Plan.

 

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SECTION 22.  EXECUTION.

 

To record the adoption of the Plan by the Board of Directors, the Company has caused its authorized officer to execute the same.

 

 

INVITAE CORPORATION

 

 

 

 

 

By

 

 

 

 

 

Name

 

 

 

 

 

Title

 

 

INVITAE CORPORATION

2015 STOCK INCENTIVE PLAN

 

23




Exhibit 10.6

 

INVITAE CORPORATION
2015 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

 

You have been granted the following Option to purchase Common Stock of Invitae Corporation (the “ Company ”) under the Company’s 2015 Stock Incentive Plan (the “ Plan ”):

 

Name of Optionee:

 

[Name of Optionee]

 

 

 

Total Number of Option Shares Granted:

 

[Total Number of Shares]

 

 

 

Type of Option:

 

o  Incentive Stock Option

 

 

 

 

 

o  Nonstatutory Stock Option

 

 

 

Exercise Price Per Share:

 

 

 

 

Grant Date:

 

[Date of Grant]

 

 

 

Vesting Commencement Date:

 

[Vesting Commencement Date]

 

 

 

Vesting Schedule:

 

[This Option becomes exercisable with respect to the first 1/4th of the Shares subject to this Option when you complete 12 months of continuous Service as an Employee or a Consultant from the Vesting Commencement Date. Thereafter, this Option becomes exercisable with respect to an additional 1/48th of the Shares subject to this Option when you complete each additional month of such Service.] [Sample language — actual vesting to be inserted.]

 

 

 

Expiration Date:

 

[Expiration Date] This Option expires earlier if your Service terminates earlier, as described in the Stock Option Agreement.

 

By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the term and conditions of the Plan and the Stock Option Agreement (the “ Agreement ”), both of which are attached to and made a part of this document.

 

By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award (including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a website, it will notify you by e-mail.

 

OPTIONEE:

 

INVITAE CORPORATION

 

 

 

 

 

 

 

 

By:

 

Optionee’s Signature

 

 

 

 

 

 

 

 

 

Title:

 

Optionee’s Printed Name

 

 

 

INVITAE CORPORATION

NOTICE OF STOCK OPTION GRANT

 

1



 

INVITAE CORPORATION

 

2015 STOCK INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

Tax Treatment

 

This Option is intended to be an incentive stock option under Section 422 of the Internal Revenue Code or a nonstatutory option, as provided in the Notice of Stock Option Grant. Even if this Option is designated as an incentive stock option, it shall be deemed to be a nonstatutory option to the extent required by the $100,000 annual limitation under Section 422(d) of the Internal Revenue Code.

 

 

 

Vesting

 

This Option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. This Option will in no event become exercisable for additional Shares after your Service as an Employee or a Consultant has terminated for any reason.

 

 

 

Term

 

This Option expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Grant Date, as shown on the Notice of Stock Option Grant (fifth anniversary for a more than 10% shareholder as provided under the Plan if this is an incentive stock option). This Option may expire earlier if your Service terminates, as described below.

 

 

 

Regular Termination

 

If your Service terminates for any reason except death or “ Total and Permanent Disability ” (as defined in the Plan), then this Option will expire at the close of business at Company headquarters on the date three (3) months after the date your Service terminates (or, if earlier, the Expiration Date). The Company determines when your Service terminates for this purpose and all purposes under the Plan and its determinations are conclusive and binding on all persons.

 

 

 

Death

 

If your Service terminates because of death, then this Option will expire at the close of business at Company headquarters on the date 12 months after the date your Service terminates (or, if earlier, the Expiration Date). During that period of up to 12 months, your estate or heirs may exercise the Option.

 

 

 

Disability

 

If your Service terminates because of your Total and Permanent Disability, then this Option will expire at the close of business at Company headquarters on the date 12 months after the date your Service terminates (or, if earlier, the Expiration Date).

 

 

 

Leaves of Absence

 

For purposes of this Option, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

1



 

 

 

crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work.

 

 

 

 

 

If you go on a leave of absence, then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.

 

 

 

Restrictions on Exercise

 

The Company will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation. The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of the Company stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Company stock as to which such approval shall not have been obtained.

 

 

 

Notice of Exercise

 

When you wish to exercise this Option you must provide a notice of exercise form in accordance with such procedures as are established by the Company and communicated to you from time to time. Any notice of exercise must specify how many Shares you wish to purchase and how your Shares should be registered. The notice of exercise will be effective when it is received by the Company. If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

 

 

 

Form of Payment

 

When you submit your notice of exercise, you must include payment of the Option exercise price for the Shares you are purchasing. Payment may be made in the following form(s):

 

 

 

 

 

·

Your personal check, a cashier’s check or a money order.

 

 

 

 

 

 

·

Certificates for Shares that you own, along with any forms needed to effect a transfer of those Shares to the Company. The value of the Shares, determined as of the effective date of the Option exercise, will be applied to the Option exercise price. Instead of surrendering Shares, you may attest to the ownership of those Shares on a form provided by the Company and have the same number of Shares subtracted from the Shares issued to you upon exercise of the Option. However, you may not surrender or attest to the ownership of Shares in payment of the exercise price if your action would cause the Company to recognize a compensation expense (or additional compensation expense) with

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

2



 

 

 

 

respect to this Option for financial reporting purposes.

 

 

 

 

 

 

·

By delivery on a form approved by the Company of an irrevocable direction to a securities broker approved by the Company to sell all or part of the Shares that are issued to you when you exercise this Option and to deliver to the Company from the sale proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The balance of the sale proceeds, if any, will be delivered to you. The directions must be given by providing a notice of exercise form approved by the Company.

 

 

 

 

 

 

·

By delivery on a form approved by the Company of an irrevocable direction to a securities broker or lender approved by the Company to pledge Shares that are issued to you when you exercise this Option as security for a loan and to deliver to the Company from the loan proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The directions must be given by providing a notice of exercise form approved by the Company.

 

 

 

 

 

 

·

If permitted by the Committee, by a “ net exercise ” arrangement pursuant to which the number of Shares issuable upon exercise of the Option shall be reduced by the largest whole number of Shares having an aggregate Fair Market Value that does not exceed the aggregate exercise price (plus tax withholdings, if applicable) and any remaining balance of the aggregate exercise price (and/or applicable tax withholdings) not satisfied by such reduction in the number of whole Shares to be issued shall be paid by you in cash other form of payment permitted under this Option.  The directions must be given by providing a notice of exercise form approved by the Company.

 

 

 

 

 

 

·

Any other form permitted by the Committee in its sole discretion.

 

 

 

 

 

 

 

 

 

Notwithstanding the foregoing, payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion.

 

 

 

Withholding Taxes and Stock Withholding

 

Regardless of any action the Company or your actual employer (the “ Employer ”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“ Tax-Related Items ”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option grant, including the grant, vesting or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to structure the terms of the grant or any aspect of the Option to

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

3



 

 

 

reduce or eliminate your liability for Tax-Related Items.

 

Prior to exercise of the Option, you shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding and payment on account obligations of the Company and/or the Employer.  In this regard, you authorize the Company and/or the Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or the Employer.  With the Company’s consent, these arrangements may also include, if permissible under local law, (a) withholding Shares that otherwise would be issued to you when you exercise this Option, provided that the Company only withholds the amount of Shares necessary to satisfy the minimum statutory withholding amount, (b) having the Company withhold taxes from the proceeds of the sale of the Shares, either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), or (c) any other arrangement approved by the Company.  The Fair Market Value of these Shares, determined as of the effective date of the Option exercise, will be applied as a credit against the withholding taxes. Finally, you shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or your purchase of Shares that cannot be satisfied by the means previously described.  The Company may refuse to honor the exercise and refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.

 

 

 

Restrictions on Resale

 

You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.

 

 

 

Transfer of Option

 

In general, only you can exercise this Option prior to your death. You may not sell, transfer, assign, pledge or otherwise dispose of this Option, other than as designated by you by will or by the laws of descent and distribution, except as provided below. For instance, you may not use this Option as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may in any event dispose of this Option in your will. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your Option in any other way.

 

 

 

 

 

However, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the Committee may, in its sole discretion, allow you to transfer this Option as a gift to one or more family

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

4



 

 

 

members. For purposes of this Agreement, “ family member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships), any individual sharing your household (other than a tenant or employee), a trust in which one or more of these individuals have more than 50% of the beneficial interest, a foundation in which you or one or more of these persons control the management of assets, and any entity in which you or one or more of these persons own more than 50% of the voting interest.

 

 

 

 

 

In addition, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the Committee may, in its sole discretion, allow you to transfer this option to your spouse or former spouse pursuant to a domestic relations order in settlement of marital property rights.

 

 

 

 

 

The Committee will allow you to transfer this Option only if both you and the transferee(s) execute the forms prescribed by the Committee, which include the consent of the transferee(s) to be bound by this Agreement.

 

 

 

Retention Rights

 

Neither your Option nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.

 

 

 

Shareholder Rights

 

Your Options carry neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as a shareholder of the Company unless and until you have exercised this Option by giving the required notice to the Company and paying the exercise price. No adjustments will be made for dividends or other rights if the applicable record date occurs before you exercise this Option, except as described in the Plan.

 

 

 

Adjustments

 

The number of Shares covered by this Option and the exercise price per Share shall be subject to adjustment in the event of a stock split, a stock dividend or a similar change in Company Shares, and in other circumstances, as set forth in the Plan.

 

 

 

Successors and Assigns

 

Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.

 

 

 

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 mailing with postage and fees prepaid, addressed to the other party hereto at the address last known

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

5



 

 

 

in the Company’s records or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto.

 

 

 

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).

 

 

 

Miscellaneous

 

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.

 

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.

 

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.

 

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.

 

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 the 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

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

6



 

 

 

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.

 

 

 

The Plan and Other Agreements

 

The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in the Agreement shall have the meanings assigned to them in the Plan. This Agreement 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. This Agreement may be amended by the Committee without your consent; however, if any such amendment would materially impair your rights or obligations under the Agreement, this Agreement may be amended only by another written agreement, signed by you and the Company.

 

BY SIGNING THE COVER SHEET OF THIS AGREEMENT,
YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN
.

 

INVITAE CORPORATION

STOCK OPTION AGREEMENT

 

7



 

INVITAE CORPORATION
2015 STOCK INCENTIVE PLAN
NOTICE OF CASH EXERCISE OF STOCK OPTION

 

OPTIONEE INFORMATION:

 

 

 

Name:

Social Security Number:

 

 

Address:

Employee Number:

 

OPTION INFORMATION:

 

Date of Grant:                                  , 20

 

Type of Stock Option:

Exercise Price per Share: $

 

o

Nonstatutory (NSO)

Total number of Shares of INVITAE CORPORATION (the “ Company ”) covered by option:

 

o

Incentive (ISO)

 

Number of Shares of the Company for which option is being exercised now:           (“ Purchased Shares ”).
Total exercise price for the Purchased Shares: $                            
Form of payment enclosed :

 

o

Check for $                    , payable to “INVITAE CORPORATION”

 

Name(s) in which the Purchased Shares should be registered:

 

The certificate for the Purchased Shares should be sent to the following address:

 

 

 

 

 

 

 

 

ACKNOWLEDGMENTS:

 

1.

 

I understand that all sales of Purchased Shares are subject to compliance with the Company’s policy on securities trades.

 

 

 

2.

 

I hereby acknowledge that I received and read a copy of the prospectus describing the Company’s 2015 Stock Incentive Plan and the tax consequences of an exercise.

 

 

 

3.

 

In the case of a nonstatutory option, I understand that I must recognize ordinary income equal to the spread between the fair market value of the Purchased Shares on the date of exercise and the exercise price. I further understand that I am required to pay withholding taxes at the time of exercising a nonstatutory option.

 

 

 

4.

 

In the case of an incentive stock option, I agree to notify the Company if I dispose of the Purchased Shares before I have met both of the tax holding periods applicable to incentive stock options (that is, if I make a disqualifying disposition).

 

 

SIGNATURE AND DATE:

 

 

 

 

 

 

 

                      , 20

 

INVITAE CORPORATION

NOTICE OF EXERCISE

 

1




Exhibit 10.7

 

INVITAE CORPORATION
2015 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD

 

You have been granted the following Restricted Shares of Common Stock of Invitae Corporation (the “ Company ”) under the Company’s 2015 Stock Incentive Plan (the “ Plan ”):

 

Date of Grant:

 

[Date of Grant]

 

 

 

Name of Recipient:

 

[Name of Recipient]

 

 

 

Total Number of Shares Granted:

 

[Total Shares]

 

 

 

Fair Market Value per Share:

 

$[Value Per Share]

 

 

 

Total Fair Market Value Of Award:

 

$[Total Value]

 

 

 

Vesting Commencement Date:

 

[                     ]

 

 

 

Vesting Schedule:

 

[The Shares subject to this Award vest when you complete twelve months of continuous Service as an Employee or a Consultant from the Vesting Commencement Date.] [Sample language – actual vesting to be inserted.]

 

By your signature and the signature of the Company’s representative below, you and the Company agree that these Restricted Shares are granted under and governed by the term and conditions of the Plan and the Restricted Stock Agreement (the “ Agreement ”), both of which are attached to and made a part of this document.

 

By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award (including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a website, it will notify you by e-mail.

 

[NAME OF RECIPIENT]

 

INVITAE CORPORATION

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

Title:

 

 

INVITAE CORPORATION

NOTICE OF RESTRICTED STOCK AWARD

 

1



 

INVITAE CORPORATION
2015 STOCK INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT

 

Payment For Shares

 

No cash payment is required for the Shares you receive. You are receiving the Shares in consideration for Services rendered by you.

 

 

 

Vesting

 

The Shares that you are receiving will vest in installments, as shown in the Notice of Restricted Stock Award.

 

 

 

 

 

No additional Shares vest after your Service as an Employee or a Consultant has terminated for any reason.

 

 

 

Shares Restricted

 

Unvested Shares will be considered “ Restricted Shares .” Except to the extent permitted by the Committee, you may not sell, transfer, assign, pledge or otherwise dispose of Restricted Shares.

 

 

 

Forfeiture

 

If your Service terminates for any reason, then your Shares will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of termination. This means that the Restricted Shares will immediately revert to the Company. You receive no payment for Restricted Shares that are forfeited. The Company determines when your Service terminates for this purpose and all purposes under the Plan and its determinations are conclusive and binding on all persons.

 

 

 

Leaves Of Absence

 

For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work.

 

 

 

 

 

If you go on a leave of absence, then the vesting schedule specified in the Notice of Restricted Stock Award may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Restricted Stock Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.

 

 

 

Stock Certificates

 

The certificates for the Restricted Shares have stamped on them a special legend referring to the forfeiture restrictions. In addition to or in lieu of imposing the legend, the Company may hold the certificates in escrow. As your vested percentage increases, you may request (at

 

INVITAE CORPORATION

RESTRICTED STOCK AGREEMENT

 

1



 

 

 

reasonable intervals) that the Company release to you a non-legended certificate for your vested Shares.

 

 

 

Shareholder Rights

 

During the period of time between the date of grant and the date the Restricted Shares become vested, you shall have all the rights of a shareholder with respect to the Restricted Shares except for the right to transfer the Restricted Shares, as set forth above. Accordingly, you shall have the right to vote the Restricted Shares and to receive any cash dividends paid with respect to the Restricted Shares.

 

 

 

Withholding Taxes

 

Regardless of any action the Company or your employer (the “ Employer ”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“ Tax-Related Items ”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or your Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the shares received under this Award, including the award or vesting of such shares, the subsequent sale of shares under this Award and the receipt of any dividends; and (2) do not commit to structure the terms of the award to reduce or eliminate your liability for Tax-Related Items.

 

No stock certificates will be released to you, unless you have paid or made adequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding and payment on account obligations of the Company and/or your Employer. In this regard, you authorize the Company and/or your Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or your Employer. With the Company’s consent, these arrangements may also include, if permissible under local law, a) withholding shares that otherwise would be delivered to you when they vest having a Fair Market Value equal to the amount necessary to satisfy the minimum statutory withholding amount , b) having the Company withhold taxes from the proceeds of the sale of the Shares, either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), or (c) any other arrangement approved by the Company. The fair market value of these shares, determined as of the date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. Finally, you shall pay to the Company or your Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or your acquisition of shares that cannot be satisfied by the means previously described. The Company may

 

INVITAE CORPORATION

RESTRICTED STOCK AGREEMENT

 

2



 

 

 

refuse to deliver the shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.

 

 

 

Restrictions On Resale

 

You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.

 

 

 

No Retention Rights

 

Neither your Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.

 

 

 

Adjustments

 

In the event of a stock split, a stock dividend or a similar change in Company Shares, or an extraordinary dividend, or a merger or a reorganization of the Company, the forfeiture provisions described above will apply to all new, substitute or additional securities or other assets to which you are entitled by reason of your ownership of the Shares.

 

 

 

Successors and Assigns

 

Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.

 

 

 

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 mailing with postage and fees prepaid, addressed to the other party hereto at the address last known in the Company’s records or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto.

 

 

 

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).

 

 

 

Miscellaneous

 

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 your Award does not in any way create any contractual or other right to receive additional grants of awards (or benefits in lieu of awards) at any time or in any amount and (iv) all determinations with respect to any additional grants, including (without limitation) the times when awards will be granted, the number of shares offered,

 

INVITAE CORPORATION

RESTRICTED STOCK AGREEMENT

 

3



 

 

 

the purchase price and the vesting schedule, will be at the sole discretion of the Company.

 

The value of this Award 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.

 

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.

 

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.

 

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 awards or any other entitlements to shares awarded, canceled, exercised, vested, unvested or outstanding in the 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

 

INVITAE CORPORATION

RESTRICTED STOCK AGREEMENT

 

4



 

 

 

subsection by contacting the Human Resources Department of the Company in writing.

 

 

 

The Plan and Other Agreements

 

The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in this Agreement shall have the meanings assigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements, commitments or negotiations concerning this Award are superseded. This Agreement may be amended by the Committee without your consent; however, if any such amendment would materially impair your rights or obligations under the Agreement, this Agreement may be amended only by another written agreement, signed by you and the Company.

 

BY SIGNING THE COVER SHEET OF THIS AGREEMENT,
YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.

 

INVITAE CORPORATION

RESTRICTED STOCK AGREEMENT

 

5




Exhibit 10.8

 

INVITAE CORPORATION

 

EMPLOYEE STOCK PURCHASE PLAN

 



 

Table of Contents

 

 

 

Page

 

 

 

SECTION 1

Purpose Of The Plan

1

 

 

 

SECTION 2

Definitions

1

(a)

“Board”

1

(b)

“Code”

1

(c)

“Committee”

1

(d)

“Company”

1

(e)

“Compensation”

1

(f)

“Corporate Reorganization”

1

(g)

“Eligible Employee”

1

(h)

“Exchange Act”

2

(i)

“Fair Market Value”

2

(j)

“IPO”

2

(k)

“Offering”

2

(l)

“Offering Date”

2

(m)

“Offering Period”

2

(n)

“Participant”

2

(o)

“Participating Company”

2

(p)

“Plan”

2

(q)

“Plan Account”

2

(r)

“Purchase Date”

3

(s)

“Purchase Period”

3

(t)

“Purchase Price”

3

(u)

“Stock”

3

(v)

“Subsidiary”

3

 

 

 

SECTION 3

Administration Of The Plan

3

(a)

Committee Composition

3

(b)

Committee Responsibilities

3

 

 

 

SECTION 4

Enrollment And Participation

4

(a)

Offering Periods

4

(b)

Enrollment

4

(c)

Duration of Participation

4

 

 

 

SECTION 5

Employee Contributions

5

(a)

Frequency of Payroll Deductions

5

(b)

Amount of Payroll Deductions

5

(c)

Changing Withholding Rate

5

(d)

Discontinuing Payroll Deductions

5

 

 

 

SECTION 6

Withdrawal From The Plan

5

(a)

Withdrawal

5

(b)

Re-enrollment After Withdrawal

6

 



 

SECTION 7

Change In Employment Status

6

(a)

Termination of Employment

6

(b)

Leave of Absence

6

(c)

Death

6

 

 

 

SECTION 8

Plan Accounts And Purchase Of Shares

6

(a)

Plan Accounts

6

(b)

Purchase Price

6

(c)

Number of Shares Purchased

6

(d)

Available Shares Insufficient

7

(e)

Issuance of Stock

7

(f)

Unused Cash Balances

7

(g)

Stockholder Approval

7

 

 

 

SECTION 9

Limitations On Stock Ownership

7

(a)

Five Percent Limit

7

(b)

Dollar Limit

8

 

 

 

SECTION 10

Rights Not Transferable

8

 

 

 

SECTION 11

No Rights As An Employee

8

 

 

 

SECTION 12

No Rights As A Stockholder

8

 

 

 

SECTION 13

Securities Law Requirements

8

 

 

 

SECTION 14

Stock Offered Under The Plan

9

(a)

Authorized Shares

9

(b)

Antidilution Adjustments

9

(c)

Reorganizations

9

 

 

 

SECTION 15

Amendment Or Discontinuance

9

 

 

 

SECTION 16

Execution

10

 



 

INVITAE CORPORATION

 

EMPLOYEE STOCK PURCHASE PLAN

 

SECTION 1           Purpose Of The Plan.

 

The Plan was adopted by the Board on January    , 2015, and shall be effective on the date on which the IPO is effective (the “ Effective Date ”).  The purpose of the Plan is to provide Eligible Employees with an opportunity to increase their proprietary interest in the success of the Company by purchasing Stock from the Company on favorable terms and to pay for such purchases through payroll deductions.  The Plan is intended to qualify under section 423 of the Code.

 

SECTION 2           Definitions.

 

(a)            Board ” means the Board of Directors of the Company, as constituted from time to time.

 

(b)            Code ” means the Internal Revenue Code of 1986, as amended.

 

(c)            Committee ” means a committee designated by the Board, as described in Section 3.

 

(d)            Company ” means Invitae Corporation, a Delaware corporation.

 

(e)            Compensation ” means the base salary and wages paid in cash to a Participant by a Participating Company, without reduction for any pre-tax contributions made by the Participant under sections 401(k) or 125 of the Code. “ Compensation ” shall exclude variable compensation (including bonuses, incentive compensation, commissions, overtime pay and shift premiums), all non-cash items, moving or relocation allowances, cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans, income attributable to the exercise of stock options, and similar items. The Committee shall determine whether a particular item is included in Compensation.

 

(f)             Corporate Reorganization ” means:

 

(i)             The consummation of a merger or consolidation of the Company with or into another entity, or any other corporate reorganization; or

 

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

 

(g)            Eligible Employee ” means any employee of a Participating Company whose customary employment is for more than five months per calendar year and for more than 20 hours per week.

 

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The foregoing notwithstanding, an individual shall not be considered an Eligible Employee if his or her participation in the Plan is prohibited by the law of any country which has jurisdiction over him or her.

 

(h)            Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(i)             Fair Market Value ” means the fair market value of a share of Stock, determined by the Committee as follows:

 

(i)             If Stock was traded on any established national securities exchange including the New York Stock Exchange or the Nasdaq Global Market on the date in question, then the Fair Market Value shall be equal to the closing price as quoted on such exchange (or the exchange with the greatest volume of trading in the Stock) on such date; or

 

(ii)            If the foregoing provision is not applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate.

 

For any date that is not a Trading Day, the Fair Market Value of a share of Stock for such date shall be determined by using the closing sale price for the immediately preceding Trading Day.  Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in the Wall Street Journal or as reported directly to the Company by the stock exchange.  Such determination shall be conclusive and binding on all persons.

 

(j)             IPO ” means the initial offering of Stock to the public pursuant to a registration statement filed by the Company with the Securities and Exchange Commission.

 

(k)            Offering ” means the grant of options to purchase shares of Stock under the Plan to Eligible Employees.

 

(l)             Offering Date ” means the first day of an Offering.

 

(m)           Offering Period ” means a period with respect to which the right to purchase Stock may be granted under the Plan, as determined pursuant to Section 4(a).

 

(n)            Participant ” means an Eligible Employee who elects to participate in the Plan, as provided in Section 4(b).

 

(o)            Participating Company ” means (i) the Company and (ii) each present or future Subsidiary designated by the Committee as a Participating Company.

 

(p)            Plan ” means this Invitae Corporation Employee Stock Purchase Plan, as it may be amended from time to time.

 

(q)            Plan Account ” means the account established for each Participant pursuant to Section 8(a).

 

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(r)             Purchase Date ” means one or more dates during an Offering on which shares of Stock may be purchased pursuant to the terms of the Offering.

 

(s)             Purchase Period ” means one or more successive periods during an Offering, beginning on the Offering Date or on the day after a Purchase Date, and ending on the next succeeding Purchase Date.

 

(t)             Purchase Price ” means the price at which Participants may purchase shares of Stock under the Plan, as determined pursuant to Section 8(b).

 

(u)            Stock ” means the Common Stock of the Company.

 

(v)            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 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(r)             Trading Day ” means a day on which the national stock exchange on which the Stock is traded is open for trading.

 

SECTION 3           Administration Of The Plan.

 

(a)            Committee Composition .  The Plan shall be administered by the Committee.  The Committee shall consist exclusively of one or more directors of the Company, who shall be appointed by the Board.

 

(b)            Committee Responsibilities .  The Committee shall have full power and authority, subject to the provisions of the Plan, to promulgate such rules and regulations as it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise the administration of the Plan, and to take all action in connection therewith or in relation thereto as it deems necessary or advisable.  Any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made at a meeting duly held.  The Committee’s determinations under the Plan, unless otherwise determined by the Board, shall be final and binding on all persons.  The Company shall pay all expenses incurred in the administration of the Plan.  No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan, and all members of the Committee shall be fully indemnified by the Company with respect to any such action, determination or interpretation.  The Committee may adopt such rules, guidelines and forms as it deems appropriate to implement the Plan, including sub plans which the Committee may establish (which need not qualify under Section 423 of the Code) for the purpose of (i) facilitating participation in the Plan by non-U.S. employees in compliance with foreign laws and regulations without affecting the qualification of the remainder of the Plan under Section 423 of the Code or (ii) qualifying the Plan for preferred tax treatment under foreign tax laws (which sub plans, at the Committee’s discretion, may provide for allocations of the authorized shares reserved for issue under the Plan as set forth in Section 14(a)). The rules of such sub plans may take precedence over other provisions of the Plan, with the exception of Section 14(a), but unless otherwise superseded by the terms of such sub plan, the provisions of the Plan shall govern the operation of such sub plan. Alternatively and in order to comply with the laws of a foreign

 

3



 

jurisdiction, the Committee shall have the power, in its discretion, to grant options in an Offering to citizens or residents of a non-U.S. jurisdiction (without regard to whether they are also citizens of the United States or resident aliens) that provide terms which are less favorable than the terms of options granted under the same Offering to employees resident in the United States, subject to compliance with Section 423 of the Code.  Notwithstanding anything to the contrary in the Plan, the Board may, in its sole discretion, at any time and from time to time, resolve to administer the Plan.  In such event, the Board shall have all of the authority and responsibility granted to the Committee herein.

 

SECTION 4           Enrollment And Participation.

 

(a)            Offering Periods .  While the Plan is in effect, the Committee may from time to time grant options to purchase shares of Stock pursuant to the Plan to Eligible Employees during a specified Offering Period.  Each such Offering shall be in such form and shall contain such terms and conditions as the Committee shall determine, subject to compliance with the terms and conditions of the Plan (which may be incorporated by reference) and the requirements of Section 423 of the Code, including the requirement that all Eligible Employees have the same rights and privileges.   The Committee shall specify prior to the commencement of each Offering (i) the period during which the Offering shall be effective, which may not exceed 27 months from the Offering Date and may include one or more successive Purchase Periods within the Offering, (ii) the Purchase Dates and Purchase Price for shares of Stock which may be purchased pursuant to the Offering, and (iii) if applicable, any limits on the number of shares purchasable by a Participant, or by all Participants in the aggregate, during any Offering Period or, if applicable, Purchase Period, in each case consistent with the limitations of the Plan.   The Committee shall have the discretion to provide for the automatic termination of an Offering following any Purchase Date on which the Fair Market Value of a share of Stock is equal to or less than the Fair Market Value of a share of Stock on the Offering Date, and for the Participants in the terminated Offering to be automatically re-enrolled in a new Offering that commences immediately after such Purchase Date.  The terms and conditions of each Offering need not be identical, and shall be deemed incorporated by reference and made a part of the Plan.

 

(b)            Enrollment .  Any individual who, on the day preceding the first day of an Offering Period, qualifies as an Eligible Employee may elect to become a Participant in the Plan for such Offering Period by executing the enrollment form prescribed for this purpose by the Company.  The enrollment form shall be filed with the Company in accordance with such procedures as may be established by the Company.   If the Committee commences an Offering on the date of the IPO, the Committee may provide for the automatic enrollment of all Eligible Employees in such Offering.

 

(c)            Duration of Participation .  Once enrolled in the Plan, a Participant shall continue to participate in the Plan until he or she ceases to be an Eligible Employee or withdraws from the Plan under Section 6(a).  A Participant who withdrew from the Plan under Section 6(a) may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Subsection (b) above.  A Participant whose employee contributions were discontinued automatically under Section 9(b) shall automatically resume participation at the beginning of the earliest Offering Period ending in the next calendar year, if he or she then is an Eligible Employee.  When a Participant reaches the end of an Offering Period but his or her

 

4



 

participation is to continue, then such Participant shall automatically be re-enrolled for the Offering Period that commences immediately after the end of the prior Offering Period.

 

SECTION 5           Employee Contributions.

 

(a)            Frequency of Payroll Deductions .  A Participant may purchase shares of Stock under the Plan solely by means of payroll deductions; provided, however, that to the extent provided in the terms and conditions of an Offering, a Participant may also make contributions through payment by cash or check prior to one or more Purchase Dates during the Offering.  Payroll deductions, subject to the provisions of Subsection (b) below or as otherwise provided by the Committee, shall occur on each payday during participation in the Plan.

 

(b)            Amount of Payroll Deductions .  An Eligible Employee shall designate on the enrollment form the portion of his or her Compensation that he or she elects to have withheld for the purchase of Stock.  Such portion shall be a whole percentage of the Eligible Employee’s Compensation, but not less than 1% nor more than 15%.  However, no payroll deduction will be made unless a Participant timely files the proper form with the Company after a registration statement covering the Stock is filed and effective under the Securities Act of 1933, as amended.

 

(c)            Changing Withholding Rate .  A Participant may not increase the rate of payroll withholding during the Offering Period, but unless otherwise provided under the terms and conditions of an Offering, may decrease the rate of payroll withholding to a whole percentage of his or her Compensation that is not less than 1% in accordance with such procedures and subject to such limitations as the Company may establish for all Participants.  A Participant may also increase or decrease the rate of payroll withholding effective for a new Offering Period by filing a new enrollment form with the Company at the prescribed location and time.  The new withholding rate shall be a whole percentage of the Eligible Employee’s Compensation, but not less than 1% nor more than 15%.

 

(d)            Discontinuing Payroll Deductions .  If a Participant wishes to discontinue employee contributions entirely, he or she may do so by withdrawing from the Plan pursuant to Section 6(a).  In addition, employee contributions may be discontinued automatically pursuant to Section 9(b).

 

SECTION 6           Withdrawal From The Plan.

 

(a)            Withdrawal .  A Participant may elect to withdraw from the Plan by filing the prescribed form with the Company at the prescribed location.  Such withdrawal may be elected at any time before the last day of an Offering Period, except as otherwise provided in the Offering.  In addition, if payment by cash or check is permitted under the terms and conditions of an Offering, Participants may be deemed to withdraw from the Plan by declining or failing to remit timely payment to the Company for the shares of Stock.  As soon as reasonably practicable thereafter, payroll deductions shall cease and the entire amount credited to the Participant’s Plan Account shall be refunded to him or her in cash, without interest.  No partial withdrawals shall be permitted.

 

5



 

(b)            Re-enrollment After Withdrawal .  A former Participant who has withdrawn from the Plan shall not be a Participant until he or she re-enrolls in the Plan under Section 4(b).  Re-enrollment may be effective only at the commencement of an Offering Period.

 

SECTION 7           Change In Employment Status .

 

(a)            Termination of Employment .  Termination of employment as an Eligible Employee for any reason, including death, shall be treated as an automatic withdrawal from the Plan under Section 6(a).  A transfer from one Participating Company to another shall not be treated as a termination of employment.

 

(b)            Leave of Absence .  For purposes of the Plan, employment shall not be deemed to terminate when the Participant goes on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing.  Employment, however, shall be deemed to terminate three months after the Participant goes on a leave, unless a contract or statute guarantees his or her right to return to work.  Employment shall be deemed to terminate in any event when the approved leave ends, unless the Participant immediately returns to work.

 

(c)            Death .  In the event of the Participant’s death, the amount credited to his or her Plan Account shall be paid to the Participant’s estate.

 

SECTION 8           Plan Accounts And Purchase Of Shares .

 

(a)            Plan Accounts .  The Company shall maintain a Plan Account on its books in the name of each Participant.  Whenever an amount is deducted from the Participant’s Compensation under the Plan, such amount shall be credited to the Participant’s Plan Account.  Amounts credited to Plan Accounts shall not be trust funds and may be commingled with the Company’s general assets and applied to general corporate purposes.  No interest shall be credited to Plan Accounts.

 

(b)            Purchase Price .  The Purchase Price for each share of Stock purchased during an Offering Period shall not be less than the lesser of:

 

(i)             85% of the Fair Market Value of such share on the Purchase Date; or

 

(ii)            85% of the Fair Market Value of such share on the last Trading Day preceding the Offering Date, or in the case of an Offering Period that commences on the IPO, 85% of the price at which one share of Stock is offered to the public in the IPO.

 

(c)            Number of Shares Purchased .  As of each Purchase Date, each Participant shall be deemed to have elected to purchase the number of shares of Stock calculated in accordance with this Subsection (c), unless the Participant has previously elected to withdraw from the Plan in accordance with Section 6(a).  The amount then in the Participant’s Plan Account shall be divided by the Purchase Price, and the number of shares that results shall be purchased from the Company with the funds in the Participant’s Plan Account. The foregoing notwithstanding, no Participant shall purchase more than such number of shares of Stock as may be determined by the Committee with respect to the Offering Period, or Purchase Period, if applicable, nor more than the amounts of Stock set forth in Sections 9(b) and 14(a).  For each Offering Period and, if

 

6



 

applicable, Purchase Period, the Committee shall have the authority to establish additional limits on the number of shares purchasable by all Participants in the aggregate.

 

(d)            Available Shares Insufficient .  In the event that the aggregate number of shares that all Participants elect to purchase during an Offering Period exceeds the maximum number of shares remaining available for issuance under Section 14(a), or which may be purchased pursuant to any additional aggregate limits imposed by the Committee, then the number of shares to which each Participant is entitled shall be determined by multiplying the number of shares available for issuance by a fraction, the numerator of which is the number of shares that such Participant has elected to purchase and the denominator of which is the number of shares that all Participants have elected to purchase.

 

(e)            Issuance of Stock.   Certificates representing the shares of Stock purchased by a Participant under the Plan shall be issued to him or her as soon as reasonably practicable after the applicable Purchase Date, except that the Committee may determine that such shares shall be held for each Participant’s benefit by a broker designated by the Committee (unless the Participant has elected that certificates be issued to him or her).  Shares may be registered in the name of the Participant or jointly in the name of the Participant and his or her spouse as joint tenants with right of survivorship or as community property.

 

(f)             Unused Cash Balances .  An amount remaining in the Participant’s Plan Account that represents the Purchase Price for any fractional share shall be carried over in the Participant’s Plan Account to the next Offering Period or refunded to the Participant in cash, without interest, if his or her participation is not continued.  Any amount remaining in the Participant’s Plan Account that represents the Purchase Price for whole shares that could not be purchased by reason of Subsection (c) or (d) above, Section 9(b) or Section 14(a) shall be refunded to the Participant in cash, without interest.

 

(g)            Stockholder Approval .  The Plan shall be submitted to the stockholders of the Company for their approval within twelve (12) months after the date the Plan is adopted by the Board. Any other provision of the Plan notwithstanding, no shares of Stock shall be purchased under the Plan unless and until the Company’s stockholders have approved the adoption of the Plan.

 

SECTION 9           Limitations On Stock Ownership.

 

(a)            Five Percent Limit .  Any other provision of the Plan notwithstanding, no Participant shall be granted a right to purchase Stock under the Plan if such Participant, immediately after his or her election to purchase such Stock, would own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any parent or Subsidiary of the Company.  For purposes of this Subsection (a), the following rules shall apply:

 

(i)             Ownership of stock shall be determined after applying the attribution rules of section 424(d) of the Code;

 

(ii)            Each Participant shall be deemed to own any stock that he or she has a right or option to purchase under this or any other plan; and

 

7



 

(iii)           Each Participant shall be deemed to have the right to purchase up to the maximum number of shares of Stock that may be purchased by a Participant under this Plan under the individual limit specified pursuant to Section 8(c) with respect to each Offering Period.

 

(b)            Dollar Limit .  Any other provision of the Plan notwithstanding, no Participant shall accrue the right to purchase Stock at a rate which exceeds $25,000 of Fair Market Value of such Stock per calendar year (under this Plan and all other employee stock purchase plans of the Company or any parent or Subsidiary of the Company), determined in accordance with the provisions of section 423(b)(8) of the Code and applicable Treasury Regulations promulgated thereunder.

 

For purposes of this Subsection (b), the Fair Market Value of Stock shall be determined as of the beginning of the Offering Period in which such Stock is purchased.  Employee stock purchase plans not described in section 423 of the Code shall be disregarded.  If a Participant is precluded by this Subsection (b) from purchasing additional Stock under the Plan, then his or her employee contributions shall automatically be discontinued and shall resume at the beginning of the earliest Offering Period ending in the next calendar year (if he or she then is an Eligible Employee).

 

SECTION 10         Rights Not Transferable.

 

The rights of any Participant under the Plan, or any Participant’s interest in any Stock or moneys to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or in any other manner other than by the laws of descent and distribution.  If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than by the laws of descent and distribution, then such act shall be treated as an election by the Participant to withdraw from the Plan under Section 6(a).

 

SECTION 11         No Rights As An Employee

 

Nothing in the Plan or in any right granted under the Plan shall confer upon the Participant any right to continue in the employ of a Participating Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Participating Companies or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her employment at any time and for any reason, with or without cause.

 

SECTION 12         No Rights As A Stockholder.

 

A Participant shall have no rights as a stockholder with respect to any shares of Stock that he or she may have a right to purchase under the Plan until such shares have been purchased on the applicable Purchase Date.

 

SECTION 13         Securities Law Requirements.

 

Shares of Stock shall not be issued under the Plan unless the issuance and delivery of such shares comply with (or are exempt from) all applicable requirements of law, including

 

8



 

(without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded.

 

SECTION 14         Stock Offered Under The Plan.

 

(a)            Authorized Shares .  The maximum aggregate number of shares of Stock available for purchase under the Plan is 1,950,000 shares(1), plus an annual increase to be added on the first day of each of the Company’s fiscal years, beginning with the fiscal year that begins January 1, 2016, equal to the least of (i) one percent (1%) of the outstanding shares of Stock on such date or (ii) a lesser amount determined by the Board; provided, however, that no annual increase shall be added more than ten years after the Effective Date of the Plan.  The aggregate number of shares available for purchase under the Plan shall at all times be subject to adjustment pursuant to Section 14.

 

(b)            Antidilution Adjustments .  The aggregate number of shares of Stock offered under the Plan, the individual and aggregate Participant share limitations described in Section 8(c) and the price of shares that any Participant has elected to purchase shall be adjusted proportionately by the Committee in the event of any change in the number of issued shares of Stock (or issuance of shares other than Common Stock) by reason of any forward or reverse share split, subdivision or consolidation, or share dividend or bonus issue, recapitalization, reclassification, merger, amalgamation, consolidation, split-up, spin-off, reorganization, combination, exchange of shares of Stock, the issuance of warrants or other rights to purchase shares of Stock or other securities, or any other change in corporate structure or in the event of any extraordinary distribution (whether in the form of cash, shares of Stock, other securities or other property).

 

(c)            Reorganizations .  Any other provision of the Plan notwithstanding, immediately prior to the effective time of a Corporate Reorganization, the Offering Period then in progress shall terminate and shares shall be purchased pursuant to Section 8, unless the Plan is assumed by the surviving corporation or its parent corporation pursuant to the plan of merger or consolidation.  The Plan shall in no event be construed to restrict in any way the Company’s right to undertake a dissolution, liquidation, merger, consolidation or other reorganization.

 

SECTION 15         Amendment Or Discontinuance.

 

The Board (or any committee thereof to which it delegates such authority) shall have the right to amend, suspend or terminate the Plan at any time and without notice. Upon any such amendment, suspension or termination of the Plan during an Offering Period, the Board (or any committee thereof to which it delegates such authority) may in its discretion determine that the applicable Offering shall immediately terminate and that all amounts in the Participant Accounts shall be carried forward into a payroll deduction account for each Participant under a successor plan, if any, or promptly refunded to each Participant.  Except as provided in Section 14, any

 


(1)  Note:  For clarity, this is a pre-split number that will be adjusted proportionately to reflect the reverse stock split implemented by the Company in advance of the consummation of the Company’s IPO.

 

9



 

increase in the aggregate number of shares of Stock to be issued under the Plan shall be subject to approval by a vote of the stockholders of the Company.  In addition, any other amendment of the Plan shall be subject to approval by a vote of the stockholders of the Company to the extent required by an applicable law or regulation. This Plan shall continue until the earlier to occur of (a) termination of this Plan pursuant to this Section 15 or (b) issuance of all of the shares of Stock reserved for issuance under this Plan.

 

SECTION 16         Execution.

 

To record the adoption of the Plan by the Board, the Company has caused its authorized officer to execute the same.

 

 

INVITAE CORPORATION

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

Date:

 

 

10




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

 

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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 (60 th ) 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

 

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sixtieth (60 th ) 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,

 

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(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

 

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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.

 

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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.

 

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(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.

 

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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.

 

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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]

 

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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).

 

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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.]

 

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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

 




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

 

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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

 

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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

 

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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

 

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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

 

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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,

 

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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 )

 

10



 

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 D

 

ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED

 

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in his or her gross income the amount of any compensation taxable to him or her in connection with his or her receipt of the property described below:

 

l.                                           The name, address and taxpayer identification number of the undersigned are as follows:

 

NAME OF TAXPAYER: Sean E. George

SPOUSE: Jennifer A. Brown

 

 

TAXPAYER’S ADDRESS:

 

 

 

TAXPAYER ID #:

SPOUSE’S ID #:

 

2 .                                       The property with respect to which the election is made is described as follows: 1,000,000 shares (the “ Shares ”) of the Common Stock of Locus Development, Inc. (the “ Company ”) .

 

3.                                       The date on which the property was transferred is: July 15, 2010.

 

4.                                       The taxable year for which the election is made is: 2010.

 

5.                                       The property is subject to the following restrictions: The Shares may be repurchased by the Company, or its assignee, upon the occurrence of certain events. This right lapses with regard to a portion of the Shares over time.

 

6.                                       The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $100.

 

7.                                       The amount, if any, paid for such property: $100.

 

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

 

The undersigned understand(s) that the foregoing election may not be revoked except with the consent of the Commissioner.

 

Dated:

7/15/10

 

/s/ Sean E. George

 

Sean E. George, Taxpayer

 

The undersigned spouse of taxpayer joins in this election.

 

Dated:

7/16/10

 

/s/ Jennifer A. Brown

 

Jennifer A. Brown, Spouse of Taxpayer

 



 

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)

 




Exhibit 10.12

 

CONFIDENTIAL TREATMENT REQUESTED.

Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

 

Lease

[Standard Form]

 

This Lease , dated for reference September 1, 2011, is made by and between Martin E. Harband, Trustee of the Harband Family Trust u/a/d 08/26/1982 (hereinafter “Lessor”), and Locus Development, Inc. , a Delaware corporation, (hereinafter “Lessee”).

 

Lessor leases to Lessee, and Lessee hires from Lessor, the following premises, situated in the City and County of San Francisco, State of California:

 

All of that certain two story concrete and steel building commonly known and designated as 454-58 Brannan Street, San Francisco, California

 

It is further mutually agreed between the Lessor and Lessee as follows:

 

1.             TERM : The term of this Lease shall be for five (5) years, commencing on the Commencement Date (defined in the Addendum) and ending on the date that is the last day of the month which is five (5) years after the Commencement Date . Following the Commencement Date, Lessor will deliver a notice to Lessee indicating the Commencement Date and the expiration date of the term of this Lease.

 

2.             RENT : Lessee agrees to pay to Lessor minimum monthly rent, in lawful money of the United States, according to the following schedule:

 

 

·

$***

per month for the first year of the lease term;

 

·

$***

per month for the second year of the lease term;

 

·

$***

per month for the third year of the lease term;

 

·

$***

per month for the fourth year of the lease term;

 

·

$***

per month for the fifth year of the lease term;

 

Rent is payable in advance of the first day of each and every month during the term of this Lease to Lessor without notice or demand and without deduction or offset. Said rent shall be paid at such place or places as may be designated in writing from time to time by Lessor, the first of said payments to be made upon execution of this Lease. Rent for any period during the term hereof which is for less than one month shall be a pro rata portion of the monthly installment. Lessee shall pay such other amount due under this lease as additional rent. Where the time for payment of any additional rental is not specified herein, the same shall be due and payable ten (10) days after Lessor’s invoice or demand.

 

3.             USE OF PREMISES : Lessee shall use said premises during the term hereof for the purposes of conducting the following business:

 

***

 

Lessee acknowledges that no warranties or representations have been made by Lessor or Lessor’s Agent regarding the fitness or suitability of the premises for the conduct of Lessee’s business, and Lessee has made Lessee’s own independent investigation to determine the fitness and suitability of the premises for Lessee’s use.

 

4.             TAXES : In addition to the rent herein provided, Lessee agrees to pay to Lessor all taxes and assessments, impositions, levies and fees commonly known as real estate taxes and assessments, imposed, levied, or assessed by any governmental authority, upon or against the land and improvements which constitute the premises. Said taxes shall be paid to Lessor by Lessee not later than thirty (30) days after

 



 

Lessor has made written demand therefor. Any tax for the lease years in which this Lease commences and terminates shall be pro-rated between Lessor and Lessee; Lessee shall only pay such portion of such tax as is included within the term of this Lease. It is further provided Lessee shall pay all tax assessments on the personal property of Lessee. Taxes and assessments referred to herein shall also include any and all special assessment district taxes, gross receipt taxes, and taxes and assessments of every kind and nature whatsoever levied or assessed in lieu of or in addition to existing real or personal property taxes, such as any tax or excise on rents or any other tax, however described, levied against Lessor on account of the rent reserved hereunder or on the business of renting space on the property of which the demised premises are a portion. However, any franchise, estate, inheritance or succession taxes imposed upon Lessor shall not be included here.

 

5.             INSURANCE :

 

LESSEE’S INSURANCE :                              Lessee shall purchase and maintain at Lessee’s expense during the term (and any extensions) of this Lease the following types of insurance with a company authorized to do business in the State of California. Lessee shall provide Lessor with a Certificate of Insurance upon commencement of the term and upon each renewal of insurance, which shall evidence the required insurance coverage and which shall designate Lessor as Additional Insured for the Bodily Injury, Personal Injury, and Property Damage coverage. Lessee shall maintain the following:

 

(a)           Bodily Injury, Personal Injury, and Property Damage Insurance with limits not less than $ 3,000,000 combined single limit, covering the demised Premises and sidewalk in front of same , which shall name Lessor as an additional insured (agreeing that this insurance is considered primary for the protection of Lessor). The policy shall contain a provision requiring thirty (30) days written notice from the insurance company to Lessor prior to reduction or cancellation.

 

(b)           Worker’s Compensation insurance as required by law.

 

(c)            Property Damage Insurance covering Lessee’s alterations, additions, and improvements, trade fixtures, equipment, merchandise, inventory, personal property and window-glass in or on the premises, in an amount not less than ninety percent (90%) of the full replacement cost thereof providing protection against any peril included within the classification, “Fire and Extended Coverage,” together with insurance against damage caused by fire-sprinkler discharge, burglary, vandalism, force-entry, and malicious mischief. Any proceeds shall be used for the repair or replacement of the property damaged or destroyed unless this Lease is terminated pursuant to the provisions of Paragraph 18 of this Lease.

 

LESSOR’S INSURANCE .                               Lessor shall purchase and maintain the following types of insurance, the annual premium for such coverage shall be reimbursed by Lessee. Lessee shall not be named as an additional insured thereunder.

 

(a)           Liability Insurance. Liability insurance protecting Lessor against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the premises in addition to, and not in lieu of the insurance required to be maintained by Lessee, and in such amount as Lessor deems reasonable and prudent.

 

(b)           Property Insurance. Property insurance insuring loss or damage to the premises in such amount as Lessor deems reasonable and prudent, but in no event less than the full replacement cost of the premises as the same shall exist from time to time, nor more than the commercially reasonable value thereof. If coverage is available and commercial appropriate, such policy shall insurance against all risks of direct physical loss or damage, except the perils of flood and/or earthquake, including coverage for debris removal and the enforcement of applicable requirements requiring the upgrading, demolition, reconstitution or replacement of the premises as the result of a covered loss.

 

(c.)          Additional Coverage. Such other coverage as is commercially reasonable from time to time, including rental value coverage, insuring the loss of the full rent for one year

 

6.             WAIVER OF SUBROGATION : Lessor and Lessee hereby waive any right that each may have against the other on account of any loss or damage arising in any manner which is covered by policies of insurance for fire and extended coverage, theft, public liability, worker’s compensation, or other insurance now

 

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or hereafter existing during the term of this Lease covering the property of which the demised premises are a portion or the demised premises or any portion thereof or operations therein. Each party shall obtain any special endorsements, if required by either party’s insurer, to evidence compliance with the waiver of any rights of subrogation. Lessor and Lessee shall each indemnify the other against any loss or expense, including reasonable attorneys’ fees, resulting from the failure to obtain such a waiver when the same is reasonably available.

 

7.             POSSESSION :  Lessee agrees that in the event of the failure or inability of Lessor to deliver possession of said premises at the time herein agreed that Lessor shall not be liable for any damages caused thereby nor shall this Lease be void. In such event, the commencement date and the expiration date of the lease-term shall be advanced accordingly.

 

8.             INDEMNIFICATION OF LESSOR :  Lessee agrees to indemnify and hold Lessor harmless from and against any and all claims, actions, damages, liability, and expense, including, but not limited to, reasonable attorneys’ fees, in connection with loss of life, personal injury, and/or damage to property arising from or out of any occurrence in, upon, or at the leased premises, or any part thereof, or occasioned wholly or in part by any act or omission of Lessee, its agents, contractors, employees, servants, customers, invitees, tenants, or subtenants. Lessor shall not be liable for (a) damage to Lessee’s property located on the premises; (b) injury or damage to persons or property resulting from fire, earthquake, flood, explosions, falling plaster, steam, gas, electricity, water, rain, or snow, or leaks from any part of the leased premises or from the pipes, appliances, or plumbing works; (c) damage caused by any other tenants or persons in the leased premises or the building of which the demised premises are a portion, occupants of adjacent property, or the public, or caused by operations in construction of any private, public, or quasi-public work.

 

The provisions hereof shall (i.) not apply where such damage, loss, or injury is caused by the negligence of Lessor subject to any limitation in Paragraph 30, and (ii.) shall survive the expiration or early termination of this Lease.

 

9.             DAMAGE TO LESSEE PROPERTY :  Except to the extent caused by Lessor’s gross negligence or willful misconduct, Lessor shall not be liable for loss or damage to Lessee’s property, fixtures, merchandise, leasehold improvements, or to the premises, or to property, fixtures, or merchandise customers caused by burglary, theft, robbery, vandalism, forced entry, riot, or by water from any source whatsoever. Lessee shall promptly repair any such damage or loss on or about the premises, including the building exterior at Lessee’s cost and expense in accordance with Paragraph 13 of this Lease.

 

Lessee acknowledges that Lessor has disclosed that if any part of the premises is under the public right-of-way (“sidewalk”), it may be subject to water-intrusion from time to time.

 

10.           SIGNS : Lessor reserves the exclusive right to the roof and exterior walls of the premises; no signs shall be posted thereon without the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned or delayed. Any such permitted signs shall satisfy all governmental code requirements. Upon the expiration of this Lease or earlier termination thereof, Lessee shall, at Lessor’s option, remove permitted signs and repair any damage caused by the posting or removal.

 

11.           [RESERVED]

 

12.          LIENS :  Lessee shall promptly pay for work done on the premises and shall keep the premises free and clear of mechanics and other liens. Lessee shall indemnify and hold Lessor and the premises harmless against loss, damage, interest, cost, attorneys’ fees, and other expenses on account of claims of such liens.

 

13.          CONDITION OF PREMISES, REPAIRS AND LAW OBSERVANCE :  The premises shall be delivered to Lessee in “AS IS” condition, subject to completion of the Base Building Improvements identified in Paragraph 44. Any additional painting or improvements shall be at Lessee’s cost and expense, subject to Lessor’s prior written approval of plans, specifications, and contractors. Except as described in Paragraph 44 and elsewhere in this Lease, Lessee shall be responsible for improvements required by the American with Disabilities

 

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Act. Lessee shall give Lessor written notice not less than five (5) working days prior to the commencement of improvements to permit Lessor to record and post Notices of Non-Responsibility. Permits, authorizations, and governmental approvals shall be obtained prior to commencement of improvements, and the improvements shall be completed with due diligence in compliance with the approved plans and specifications. Lessee agrees to conform to and comply with all public laws and regulations in the use, occupation and repair of the premises and to keep and maintain the premises in good and sanitary order, condition, and repair during the term of this Lease.

 

Lessor shall maintain in good condition the roof, exterior walls, foundations, sub-surface plumbing and sub-surface electrical systems, and the sidewalks adjacent to the premises (“Structural Components and Building Systems”), except for repair of damage caused by the grossly negligent act(s) of Lessee. Lessor shall make repairs under this Paragraph after receipt of written notice of the need for such repairs. Lessee expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor’s expense.

 

14.          CHARGES FOR PUBLIC UTILITIES AND SERVICES :  Lessee hereby agrees to pay for all heat, water, sewer service charge, light, gas, power, telephone, custodial services, garbage collection, and other services supplied to the premises. Lessor shall not be responsible for the failure or interruption of any such service furnished the premises.

 

16.          DEBRIS :  Lessee shall keep storage areas clean and free of empty cartons, packing materials, or debris that constitutes a fire hazard. Lessee shall have garbage removed regularly, and keep the sidewalk in front of the premises clean and free of debris.

 

17.          RIGHT OF LESSOR TO PERFORM :  All obligations to be performed by Lessee under this Lease shall be performed at Lessee’s cost and expense and without any abatement of rent. If Lessee fails to perform any act required hereunder, and such failure shall continue for ten (10) days after written notice by Lessor, Lessor may perform any such act and Lessee shall reimburse Lessor (as additional rent) for all reasonable expenses incurred by Lessor.

 

18.          DESTRUCTION OF PREMISES :  (a) In the event of a partial destruction of the premises before or during the lease term by a cause covered by the typical standard form fire, extended coverage, and malicious mischief insurance, Lessor shall make necessary repairs within 120 days, to the extent of the insurance proceeds made available to Lessor, provided such repairs can be made under applicable public laws and regulations. Partial destruction shall not void this Lease, except that Lessee shall be entitled to a proportionate reduction of rent while such repairs are being made, provided that the damage is not the result, of the gross negligence or willful misconduct of Lessee or Lessee’s agents, contractors, employees, invitees, or licensees. If the repairs cannot be made within 120 days, Lessor may elect to make same within a reasonable period of time, this Lease continuing in full force and effect and the rent to be proportionately abated as provided in this Paragraph. In the event that Lessor does not so elect, or if the repairs cannot be made under such laws and regulations, this Lease may be terminated at the option of either Lessor or Lessee by written notice to the other within thirty (30) days after the occurrence of the damage. (b) Intentionally omitted (c) A total destruction of the building, excluding foundations, in which the of which the premises are a part shall terminate this lease. (d) If the premises are partially destroyed or damaged during the last twelve months of the term of this Lease, this Lease may be terminated at the option of either Lessor or Lessee by written notice to the other within thirty (30) days after the occurrence of the damage. If the premises are repaired by Lessor, Lessee, and not Lessor shall repair or replace the property of Lessee, including improvements installed on the premises by Lessee. In the event this Lease is terminated under the provisions of this paragraph, the portion of any rentals paid in advance by Lessee to Lessor covering the period following such termination shall be repaid by Lessor to Lessee. Lessee waives any right to terminate this Lease as a result of any statutory provisions now or hereafter in effect pertaining to the damage or destruction of demised premises of the building of which demised premises are a portion except as expressly provided herein.

 

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19. ARBITRATION OF DISPUTES’ : In the event of any dispute between Lessor and Lessee relative to the provisions of this Lease (except for an action of Unlawful Detainer), such dispute shall be resolved by binding arbitration in accordance with the California Code of Civil Procedure, Title 9, Section 1280 et seq. The arbitrator shall be appointed by written agreement of the parties; however, if the parties cannot agree upon an arbitrator within 45 days from the date of the written demand for arbitration, the arbitrator shall be appointed by the Presiding Judge of the Superior Court for the county in which the premises are located. Lessor and Lessee shall each bear one-half of the cost of arbitration, or as the arbitrator shall otherwise determine.

 

(a)           NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES” PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. BY INITIALING IN THE SPACE BELOW YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION TO NEUTRAL ARBITRATION.

 

LESSOR’S INITIALS

 

 

LESSEE’S INITIALS

 

 

20.           ASSIGNMENT AND SUBLETTING : Lessee shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, hypothecate, or otherwise transfer or encumber all or any part of Lessee’s interest in this Lease without Lessor’s prior written consent. Lessor shall not unreasonably withhold consent to the subletting of demised premises or the assignment of this Lease in the event the proposed subleases or assignee meets reasonable credit, business/qualification, and reputation requirements and the occupancy resulting from such subletting or assignment is consistent with the general character of the business as described in Paragraph 3 of this Lease. Any of the foregoing acts without Lessor’s prior written consent shall be void and shall, at the option of Lessor, terminate this Lease. Any transfer or change in ownership of fifty percent (50%) or more of the stock or interest in Lessee shall constitute an assignment for purpose of this paragraph. No consent by Lessor to any assignment or subletting by Lessee shall release Lessee of Lessee’s obligation to pay the rent and to perform all the obligations to be performed by Lessee hereunder for the term of this Lease or any extension thereof. The acceptance of rent by Lessor from any other party shall not be deemed to be a waiver by Lessor of any provisions hereof. Consent to one assignment or subletting shall not be deemed to be consent to any subsequent assignment or subletting. Each request for consent to an assignment or subletting shall be in writing, accompanied by relevant information regarding the proposed assignee (or sublessee) together with a non-refundable deposit of $750.00 as compensation for the Lessor’s consideration and processing of the request for consent.

 

21.           EMINENT DOMAIN : If the whole or any part of the premises shall be taken or condemned by any public authority for any public or quasi-public use, then this Lease and all rights and liabilities of the parties thereafter accruing shall cease after the date when such possession shall be required or title to be vested, without apportionment to Lessee of the award or other compensation, if any, by reason of such requisition, taking, or condemnation: but nothing herein contained shall deprive Lessee of the right, if any, to receive from the requisitioning or condemning authority award for compensation or loss of or damage to any of Lessee’s tangible property or business, provided the same is not in diminution of the award or compensation payable to Lessor; and Lessee shall make payment of all rent and other charges accrued and pro-rated to the date of such requisition, taking, or condemnation. In the event this Lease is terminated under the provisions of this Paragraph, the pro-rata portion of any rentals paid in advance by Lessee to Lessor covering the period

 

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following such termination shall be repaid by Lessor to Lessee. For purposes of this Paragraph, a voluntary sale or conveyance in lieu of condemnation, under threat of condemnation, shall be deemed a taking under the power of eminent domain.

 

22.          ENTRY BY LESSOR : Lessee shall permit Lessor, or the agents of Lessor, to enter into and upon said premises at all reasonable times for the purpose of inspecting the same or for the purpose of maintaining the building in which the same premises are situated, or for the purpose of making repairs, alterations, or additions to any other portion of said building, including the erection and maintenance of scaffolding as may be required (without the same constituting an eviction of Lessee in whole or in part), providing that all such work shall be performed as promptly and with as little interference to Lessee as reasonably possible, or for the purpose of posting notices of non-responsibility for alterations, additions, or repairs, or for the purpose of placing upon the property in which the said premises are located any usual or ordinary “for sale” signs without any rebate of rent to Lessee for any loss of occupancy or quiet enjoyment of the premises thereby occasioned. Lessor, or the agents of Lessor, shall have the right during the last thirty (30) days of the term, to enter upon said premises, and to affix upon any suitable part thereof a notice for re-letting the same, and Lessee will not remove said notice.

 

23.          INABILITY TO PERFORM : This Lease and the obligations of the Lessee under this Lease shall not be affected or impaired because Lessor is unable to fulfill any of his obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of strike, labor troubles, acts of God, or any other cause beyond the reasonable control of the Lessor.

 

24.          LATE CHARGES : IT IS AGREED BY LESSOR AND LESSEE THAT LATE PAYMENT OF RENT, ADDITIONAL RENT, OR OTHER SUM DUE HEREUNDER WILL CAUSE LESSOR TO INCUR COSTS NOT CONTEMPLATED BY THIS LEASE, SUCH COSTS TO INCLUDE, WITHOUT LIMITATION, PROCESSING AND ACCOUNTING CHARGES, LOSS OF USE OF FUNDS, AND UNFORESEEN ADVANCEMENTS BY LESSOR FOR MORTGAGES AND OTHER FINANCING COSTS. IT IS FURTHER AGREED THAT IN THE EVENT OF ANY SUCH DEFAULT BY LESSEE (i) IT WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO DETERMINE AND FIX THE ACTUAL DAMAGES SUFFERED BY LESSOR, AND (ii) THE CHARGES SET FORTH BELOW ARE, AS OF THE DATE HEREOF, A FAIR AND REASONABLE ESTIMATE OF LESSOR’S DAMAGES. IF LESSOR DOES NOT RECEIVE ANY PAYMENT FIVE DAYS AFTER THE DUE DATE, LESSEE AGREES TO PAY LESSOR FORTHWITH A LATE CHARGE FOR EACH SUCH LATE PAYMENT IN AN AMOUNT EQUAL TO FIVE PERCENT ( 5 %) OF THE DELINQUENT SUM. ACCEPTANCE OF ANY LATE CHARGE SHALL NOT CONSTITUTE A WAIVER OF THE DEFAULT WITH RESPECT TO THE OVERDUE AMOUNT AND SHALL NOT PREVENT LESSOR FROM EXERCISING ANY OF ITS RIGHTS AND REMEDIES UNDER THIS LEASE, OR APPLICABLE LAW.

 

LESSOR’S INITIALS

 

 

LESSEE’S INITIALS

 

 

25.          DEFAULTS AND REMEDIES:

 

A.            Definition of Default. Without limitation thereto, each of the following events is deemed to be a default hereunder:

 

(1)           Lessee’s interest, or any part of Lessee’s interest, in this Lease is assigned or transferred in whole or in part, voluntarily or by operation of law, without Lessor’s prior written consent, except as set forth in this Lease.

 

(2)           A finding or judgment of insolvency of Lessee, a voluntary or involuntary petition in bankruptcy; the levy of a writ of execution of the business of Lessee or on the assets of Lessee located in the leased premises, which is not discharged within five (5) days; the filing of a petition for reorganization, or for an arrangement, against Lessee, or any member of Lessee (if Lessee is a partnership or joint venture); the appointment of a receiver for the business or of the assets of Lessee (except a receiver appointed at the

 

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instance or request of Lessor); or a general assignment, or any assignment, for the benefit of Lessee’s creditors.

 

(3)           Intentionally omitted.

 

(4)           Lessee fails (a) to make any payment of rent or any other payment required to be made by Lessee herein, within ten(10) business days after receiving notice from Lessor that such amount is due or (b) in keeping of any other term, covenant, or condition of this Lease, when such failure continues for ten (10) business days after notice thereof by Lessor.

 

(5)           Within one calendar year, Lessee shall have been in default in the payment of any sum due under this Lease more than two times and, as a result thereof, Lessor shall have served Lessee within said calendar year two or more three-day notices to quit or pay rent (which default shall be deemed a non-curable default).

 

(6)           The commission by Lessee of waste and/or nuisance.

 

B.            Lessor’s Remedies: In the event of Lessee’s defaults as defined in Paragraph 24 A hereof, in addition to all other rights and remedies which Lessor may have in equity or in law, Lessor shall have all of the following remedies’

 

(1)           Lessor shall have the right, without any further demand or notice, to terminate this Lease, re-enter the leased premises, without prejudice to any other remedies that Lessor may have.

 

(2)           In the event of termination, Lessor shall have all the rights and remedies of a lessor provided by law. The amount of damages which Lessor may recover includes: (a) the worth at the time of award of the unpaid rent or other charges which had been earned at the time of termination; (b) the worth at the time of award of the amount by which the unpaid rent or other charges which would have been earned after termination until the time of award exceeds the amount of loss of such rental and other charges that Lessee proves could have been reasonably avoided; (c) the worth at the time of award of the amount by which the unpaid rent and other charges for the balance of the term after the time of award exceeds the amount of the loss of such rental and other charges for such period that Lessee proves could be reasonably avoided; (d) any other amount necessary to compensate Lessor for all detriment proximately caused by Lessee’s failure to perform Lessee’s obligations under this Lease, including, by way of illustration and not limitation, real estate commissions, or which in the ordinary course of events would be likely to result therefrom. The “worth at the time of award” as utilized in sub-parts (a), (b), (c), and (d) hereinabove shall be computed by allowing interest at the rate which is the maximum permitted by law.

 

(3)           Lessor may continue the Lease in effect after Lessee’s breach and abandonment and recover rent as it becomes due, subject only to reasonable limitations, as provided in California Civil Code Section 1951.4.

 

(4)           In the event Lessor gives Lessee written notice that Lessor elects not to terminate this Lease, Lessee shall have the right to sublease the leased premises or assign Lessee’s interest in this Lease, or both, subject to all other provisions of this Lease pertaining to assignments and subleasing, and Lessor shall have all the remedies of a lessor provided by law. Notwithstanding any such election by Lessor not to terminate this Lease, Lessor may at any time thereafter elect to terminate this Lease for any subsequent breach or default.

 

(5)           Lessor shall have the right to cause a receiver to be appointed in any action against Lessee to take possession of the leased premises and/or to collect the rents or profits derived therefrom. Said receiver may, if it is necessary or convenient in order to collect such rents or profits, take possession of any property belonging to Lessee and used in the conduct of such business and may use the same in conducting such business on the leased premises without compensation to Lessee for such use. Neither the application for the appointment of such receiver nor the appointment of such receiver shall constitute an election on the part of Lessor to terminate this Lease unless a written notice of such intention is given to Lessee.

 

26.          ATTORNEYS’ FEES : In the event of any action at law or suit in equity to interpret or enforce the provisions of this Lease, the prevailing party shall be entitled to recover from the other reasonable attorneys’ fees and costs. If either party, without fault on the other’s part, be made a party to any litigation instituted by or against the other, such party shall pay to the other all costs and expenses incurred by such party, including reasonable attorneys’ fees. In the event that Lessor should be required to retain counsel for the collection of rent or the enforcement of any provision hereof, and such collection of rent or enforcement

 

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hereof docs not necessitate the bringing of an action at law or equity, then Lessor shall be entitled to any and all reasonable costs and reasonable attorneys’ fees incurred by Lessor, and the same shall be paid by Lessee within five (5) business days after receipt by Lessee of written demand by Lessor for the same. Lessee agrees to indemnify, defend, and hold harmless Lessor from and against any liability arising from any breach by Lessee hereof, including reasonable attorneys’ fees and reasonable costs incurred in connection therewith, whether such claim arises before or after the expiration or termination of this Lease.

 

27.          TRANSFER OF LESSORS INTEREST : In the event of a sale or conveyance by Lessor of Lessor’s interest in the property of which said demised premises are the whole or a portion, after the date of such transfer Lessor shall be relieved from all liability as respect to Lessor’s obligations thereafter to be performed, provided that any funds in the hands of Lessor at the time of transfer in which Lessee has an interest, shall be delivered to the successor of Lessor. The obligations contained in this Lease to be performed by Lessor shall, subject to the foregoing, be binding on Lessor’s successor only during their respective periods of ownership.

 

28.          SUBORDINATION : Lessee expressly agrees that this Lease is and shall be subject and subordinate to all mortgages, deeds of trust, or other encumbrances now or hereafter placed upon the demised premises or property by Lessor, provided that such mortgages, deeds of trust, or other encumbrances contain Lessee non-disturbance clauses in standard form. Lessee further agrees that within ten (10) business days after being requested in writing to do so by Lessor, Lessee will execute, acknowledge, and deliver any documents prepared by Lessor that are required to effect such subordination. Should Lessee fail to execute, acknowledge, and deliver such instruments within the ten (10) business day period, Lessee shall be deemed to have irrevocably appointed Lessor and each of Lessor’s successors and assigns, to be Lessee’s attorney-in-fact to execute, acknowledge, and deliver any such instruments for and on behalf of Lessee.

 

29.          ESTOPPEL CERTIFICATE : Upon request from Lessor, the Lessee shall execute, acknowledge, and deliver within ten (10) business days to Lessor a certificate certifying the matters listed below. Such certificate may be relied upon by any prospective purchaser, mortgagee or beneficiary under the deed of trust on the property of which the demised premises is a portion or any part thereof.

 

(a)           That this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect, as modified, and stating the date and nature of each modification);

 

(b)           The date to which the rental and other sums payable hereunder have been paid;

 

(c)           That no notice has been received by Lessee of any default which has not been cured, except as to defaults specified in said certificate; and

 

(d)           Such other matters as may be reasonably requested by Lessor or any lender or buyer of the land underlying the property of which the demised premises are a portion.

 

30.          WAIVER : The waiver by Lessor of any breach of any term, covenant, or condition herein contained shall not be deemed to be a waiver of such term, covenant, or condition or any subsequent breach of the same or any other term, covenant, or condition herein contained. The subsequent acceptance of rent by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant, or condition of this Lease, other than the failure of Lessee to pay the particular rental so accepted, regardless of Lessor’s knowledge of such preceding breach at the time of acceptance of such rent. No covenant, term, or condition of this Lease shall be deemed to have been waived by Lessor, unless such waiver be in writing by Lessor. No payment by Lessee or receipt by Lessor of a lesser amount than the rent and additional rent herein provided shall be deemed to be other than on account of the earliest amount due and payable hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Lessor may accept any such check or payment without prejudice to Lessor’s right to recover the balance of such rent or additional rent or to pursue any other remedy provided for in this Lease.

 

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31.           DEFAULT BY LANDLORD : Lessee’s Remedies.

 

(a)           In the event that Lessor shall be liable to Lessee for any damages sustained by Lessee as a result of Lessor’s breach, it is expressly understood that any money judgment resulting from any default or other claim arising under this Lease shall be satisfied out of Lessor’s interest in the subject property, including, all rents, profits, insurance and other income from the operation of the subject property in which the demised premises are located, and except for the subject property, no other real, personal, or mixed property of the Lessor wherever situated shall be subject to levy on any such judgment obtained against Lessor, and if Lessor’s interest in the subject property is insufficient for the payment of such judgment, Lessee will not institute any further action, suits, claim or demand, in law or in equity, against Lessor for or on account of such deficiency. Lessee hereby waives, to the extent waivable under law, any rights to satisfy said money judgment against Lessor except from the subject property in which the demised premises are located.

 

(b)           Notwithstanding anything herein contained to the contrary, Lessee hereby waives, to the extent waivable under any law, any right to specific performance in the event of Lessor’s default referred to herein, and Lessee expressly agrees that except as provided in the immediately following sentence, Lessee’s remedy shall be limited to the monetary damages referred to in this Paragraph 30. Notwithstanding the foregoing, in the event of failure by Lessor to give any consent as provided in Paragraph 19 Lessee shall be entitled to specific performance, but in no event shall Lessor be responsible in monetary damages for failure to give such consent unless said consent is withheld maliciously or in bad faith.

 

32.          SURRENDER : Lessee agrees on the last day of said term, or other sooner termination of this Lease, to surrender said premises in the same condition as received subject to reasonable use and wear (damage by act of God excepted), swept broom clean, and to remove all rubbish from said premises. All locks, bolts, alterations, and additions which may be affixed to or made by either of the parties hereto upon the said premises, except moveable furniture and moveable fixtures put in at the expense of Lessee, shall be the property of Lessor, at the option of Lessor, and shall remain upon and be surrendered with the premises as part thereof at the termination of this Lease, without disturbance, molestation, or injury unless Lessor instructs Lessee to remove any of said items; and immediately upon receipt of notice from Lessor, Lessee shall, at Lessee’s sole cost, remove any such items. Lessee shall repair any damage to the demised premises occasioned by the removal of Lessee’s fixtures, furnishings, and equipment.

 

33.          HOLDING OVER : Any holding over after the expiration of the said term shall be construed to be a tenancy from month to month only, and shall otherwise be upon the same terms and conditions herein specified, so far as applicable, except the rent shall be at a monthly rate equal to one hundred twenty-five percent (125%) of the monthly rent in effect at the termination of this Lease. Lessee shall indemnify and hold Lessor harmless for any loss, damage, or liability resulting from Lessee’s delay in surrendering the premises, including without limitation any claims made by any succeeding tenant based upon such delay. Nothing contained in this Paragraph shall waive Lessor’s right of re-entry or any other right, and Lessee shall be only a lessee at sufferance while Lessee is holding over without Lessor’s written consent.

 

34.          LAW GOVERNING : This Lease shall be governed by the laws of the state of California.

 

35.          TIME IS OF THE ESSENCE : Time is of the essence of this Lease in the performance of each and every term, covenant, and condition of this Lease except in respect to the delivery of possession of the demised premises at the commencement of the term hereof.

 

36.          CORPORATE AUTHORITY : If Lessor or Lessee is a corporation or limited liability company, each individual executing this Lease on behalf of the entity represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of the entity in accordance with its governing instruments and that this Lease is binding upon the entity in accordance with its terms, and that Lessee is qualified to do business in the state in which the premises is located.

 

37.          SECURITY DEPOSIT : Upon execution of this Lease, Lessee has deposited with Lessor the sum of Sixteen Thousand Six Hundred Dollars ($ 16,600.00) , receipt of which is hereby acknowledged by Lessor. Said sum shall be held by Lessor as security for the faithful performance of Lessee of all the terms,

 

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covenants, and conditions of this Lease by said Lessee to be kept and performed during the term hereof. If at any time during the term of this Lease any of the rent herein reserved, or any other sum payable by Lessee to Lessor hereunder, shall be overdue and unpaid, then Lessor may, at the option of Lessor (but Lessor shall not be required to), appropriate and apply any portion of this Security Deposit to the payment of any such overdue rent or other sum. In the event of the failure of Lessee to keep and perform all of the terms, covenants, and conditions of this Lease to be kept and performed by Lessee, then at the option of Lessor, the Lessor may, after terminating this Lease, appropriate and apply the entire Security Deposit, or so much thereof as may be necessary, to compensate Lessor for all loss or damage sustained or suffered by Lessor, due to such breach on the part of Lessee. Should the entire Security Deposit, or any portion thereof, be appropriated and applied by Lessor for the payment of overdue rent or other sums due and payable to Lessor by Lessee hereunder, the Lessee shall, upon the written demand of Lessor, forthwith remit to Lessor a sufficient amount in cash to restore said Security Deposit to the original sum, and Lessee’s failure to do so within five (5) business days after receipt of such demand shall constitute a breach of this Lease. Should Lessee comply with all of said terms, covenants, and conditions and promptly pay all of the rental herein provided for as it falls due, and all other sums payable by Lessee to Lessor hereunder, said Security Deposit shall be returned in full to Lessee at the end of the term of this Lease or upon the earlier termination of this Lease under the provisions of Paragraph 18 hereof. Lessee acknowledges that this Security Deposit is not prepaid rent and shall not be applied by Lessee to the payment of any rent due Lessor herein. No interest shall be paid on this Security Deposit by Lessor to Lessee. In the event that Lessor transfers said Security Deposit to Lessor’s successor in interest, Lessor shall be discharged from any further liability with respect to such Security Deposit.

 

38.           NOTICES :          (a)            Notice Requirements .                        All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular or certified mail, overnight courier, or by facsimile or electronic transmission. The address noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee’s taking possession of the Premises, the premises shall constitute Lessee’s address for notice.

 

(b)           Date of Notice .                           Any notice sent by certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 72 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by overnight courier shall be deemed given upon the date of receipt provided by the courier service. Notices transmitted by facsimile or electronic transmission shall be deemed delivered on confirmation receipt date, provided a copy is concurrently transmitted by personal delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

 

39.          NONDISCLOSURE . The terms of this Lease shall be held in confidence and not disclosed to any third party without the prior written consent of Lessor.

 

40.           DELIVERY OF PREMISES . Lessee shall be given possession of the premises following (a) execution and delivery of this lease, (b) payment of funds representing the first month’s rent and the security deposit, (c) evidence of insurance coverage as required in Paragraph 5, and (d) re-delivery of the premises by the current tenant, Level 2 Industries, LLC. Lessor shall deliver possession of the premises in “as-is” condition, but subject to completion of the Lessor-facade-improvement project identified in Paragraph 45. In the event Lessee occupies the premises prior to the Commencement Date, no rent shall be payable for the period of such early possession, but all of the other terms and conditions of the lease shall be applicable.

 

41.          OPTION . Lessee is granted the option to extend the term of this Lease for an additional five (5) years commencing on the day following the last day of the fifth year of the Lease term. As a condition precedent to exercising such option, Lessee must be in lawful possession of the premises and not in default on the Exercise Notice Date, or in the thirty days prior thereto. The option shall be exercised by written notice to Lessor on or before the date six-months prior to the commencement date of the extension term, which date shall be known as the “Exercise Notice Date”.

 

10



 

The rent payable during the option term shall be equal to 95% of the Fair Market Rental Rate (“FMMR”) as determined with reference to similar properties in the same local marketplace. In no event, however, shall the rent for the first, or any subsequent year, of the Option Term be less than the rent for the preceding lease year.

 

Lessor and Lessee shall meet during the ninety (90) days after the Exercise Notice Date, and endeavor to agree upon the FMRR payable during the Option Term. In the event Lessor and Lessee cannot, agree, the rent shall be determined by binding appraisal in the manner set forth below.

 

Within one hundred twenty (120) days after the Exercise Notice Date, Lessor and Lessee shall either (a) jointly appoint an appraiser, or (b) failing this, separately designate their own appraiser. No person may be appointed as an appraiser for the purpose herein unless that person is a state of California Certified General Real Estate Appraiser or member of the Appraisal Institute (MAI) in good standing and has at least five years’ experience in apprising commercial and industrial properties in the San Francisco Bay Area. The parties shall each pay one-half of the fees and expenses of a jointly appointed appraiser, or if the parties separately designate their owner appraiser, each party shall pay the fees and expenses of its separately designated appraiser. If an appraiser is jointly appointed, that appraiser shall determine the FMRR. If two appraisers are appointed and cannot reach agreement on the FMRR within thirty (30) days after appointment, then the appraisers shall appoint a third appraiser with like qualification. If a majority of the appraisers cannot reach agreement on the FMRR within twenty (20) days after the third appraiser has been selected, then the average of the two closest appraisals shall determine the FMRR and such determination shall be binding and conclusive upon Lessor and Lessee. Each party shall pay fifty percent (50%) of the fees and expenses of the third appraiser.

 

In the event that the appraisal procedure has not concluded by the commencement of the Option Term, then the Lessee shall make rent payments at the rate equal to the rent of the preceding lease year, subject to adjustment as provided herein at the commencement of the Option Term. Within twenty days after conclusion of the appraisal procedure, Lessee shall remit the accumulated rent deficiency, if any, for the prior months of the Option Term.

 

42.           EARLY ACCESS .              Lessee shall have access to the premises for space planning following execution and delivery of this Lease, (b) payment of funds representing the first month’s rent and the security deposit, and (c) evidence of insurance coverage as required in Paragraph 5. Lessor shall use its best efforts to secure such access prior to the current tenant vacating the premises; however, prior thereto, access will be subject to the concurrence of the current tenant. Upon the current tenant vacating the premises, Lessee shall have full access and may commence its Tenant Improvements.

 

43.           LESSEE IMPROVEMENTS .                        Lessee may cause such improvements to the premises (“Tenant Improvements”) at Lessee’s cost and expense, subject to Lessor’s prior written approval of plans, specifications, and contractors, which approval shall not be unreasonably withheld, conditioned or delayed. Lessee shall give Lessor written notice not less than five (5) business days prior to the commencement of the Tenant Improvements to permit Lessor to record and post Notices of Non-Responsibility. Permits, authorizations, and governmental approvals shall be obtained prior to commencement of the Tenant Improvements, and the Tenant Improvements shall be completed with due diligence in compliance with the approved plans and specifications. The initial Tenant Improvements to be constructed by Lessee are described in plans and specifications attached hereto as Schedule 1 (“Initial Build-out Plans and Specifications”). Lessor has approved the Initial Build-out Plans and Specifications.

 

44.           LESSOR REIMBURSEMENT .                    Lessor shall reimburse Lessee for costs and expences paid by Lessor up to Eighty-Three Thousand Dollars ($83,000.00) for the aggregate cost of HVAC, interior painting, lighting, window coverings, flooring, carpeting and kitchen installation (“Reimbursable Work”). Within thirty (30) days after delivery of paid invoices for completed portions of the Reimbursable Work, Lessor shall deliver such reimbursements to Lessee. The installation of an HVAC system is a precondition for any cost reimbursement.

 

11



 

45.           BASE BUILDING IMPROVEMENTS .                  Lessor, at its cost and expense, shall cause the following improvements to be completed to the premises (“Base Building Improvements”):

 

(a)           New building façade: new double doors at the main entry; new double doors at the east entry; new glass windows across the façade of the building; new roll-up garage door; and new exterior paint.

(b)           New lobby area with new staircase at main entry;

(c)           ADA compliant restrooms on the ground and second floor;

(d)           Removal of existing single entry door and HC ramp in the middle of the building.

 

In Witness Whereof , Lessor and Lessee have executed this Lease on the day and year below.

 

 

LESSOR

 

 

 

 

 

/s/ Martin E. Harband.

 

Martin E. Harband, Trustee

 

 

 

Date:  June 13, 2011

 

 

 

Address:

155 Bovet Road, Suite 780,

 

 

San Mateo, CA 94402-3155

 

 

(T) 650. 573-9500 ext 115;

 

 

(F) 650. 573-9689;

 

 

mharband@yahoo.com

 

 

 

 

 

LESSEE:

 

 

 

LOCUS DEVELOPMENT, INC.

 

a Delaware corporation

 

 

 

By:

/s/ Sean E. George

 

 

 

 

Its:

President & CEO

 

 

 

 

 

Date:  June 13, 2011

 

 

 

Address:

 

                                                         .

 

                                                                            .

 

 

12


 

ADDENDUM NO. 1 TO LEASE

 

454-58 Brannan Street

San Francisco, California

 

This ADDENDUM NO. 1 TO LEASE (“ Addendum ”) is made to the Lease dated for reference September 1, 2011 (“ Lease ”) between Martin E. Harband, Trustee of the Harband Family Trust u/a/d 08/26/1982 (hereinafter “Lessor”), and Locus Development, Inc., a Delaware corporation, (hereinafter “Lessee”). Lessor and Lessee hereby agree that notwithstanding anything contained in the Lease to the contrary, the provisions set forth below shall be deemed to be a part of the Lease and shall supersede, to the extent appropriate, any contrary provision of the Lease. All references to the Lease in this Addendum shall be construed to mean the Lease and all addenda and exhibits thereto, as amended and supplemented by this Addendum. All defined terms used in this Addendum, unless specifically defined in this Addendum, shall have the same meaning as such terms have in the Lease. The leased premises described in the Lease shall be referred to herein as the “Premises.”

 

1.             Consents and Approvals . Any time the consent or approval of Lessor is required under this Lease, such consent or approval, as the case may be, shall not be unreasonably withheld, conditioned or delayed. Whenever the Lease grants Lessor or Lessee the right to take action, exercise discretion, establish rules and regulations or make allocations or other determinations, Lessor and Lessee shall act reasonably and in good faith and take no action which might result in the frustration of the reasonable expectations of a sophisticated tenant or landlord concerning the benefits to be derived by Lessee hereunder.

 

2.             Non-Applicability of Sections . The following Lease paragraphs are hereby deemed deleted and of no further force or effect:

 

(a)           Paragraph 7.

 

(b)           Paragraph 23.

 

3.             Commencement Date .

 

(a)           The “Commencement Date” shall be the later of (i) September 1, 2011 or (ii) the date (“Delivery Date”) that Lessor delivers the Premises to Lessee with all of the Base Building Improvements completed in compliance with Applicable Laws (as defined below) and approved by Lessee. Lessee shall receive a day for day rent credit for each day beyond September 1, 2011 that Lessor fails to deliver the Premises to Lessee with all the Base Building Improvements completed in compliance with Applicable Laws.

 

(b)           If Lessee requests any changes to the Base Building Improvements, furnishes inaccurate or erroneous specifications or other information to Lessor or its contractors, or otherwise delays Lessor or Lessor’s contractors from completing the Base Building Improvements (any of the foregoing being referred to in this Lease as “Tenant Delay”), then the Commencement Date shall be deemed to have occurred for all purposes, including Lessee’s obligation to pay rent, as of the date Lessor reasonably determines that it would have been able

 

1



 

to deliver the Premises to Lessee but for the collective Tenant Delays. Should Lessor determine that the Commencement Date should be changed in accordance with the foregoing, it shall so notify Lessee in writing. Lessor’s determination shall be conclusive unless Lessee notifies Lessor in writing, within five (5) business days thereafter, of Lessee’s election to contest same by binding arbitration in accordance with the terms set forth below, and judgment on the arbitration award may be entered in any court having jurisdiction thereof. Pending the outcome of such arbitration proceedings, Lessee shall make timely payment of all rent due under this Lease based upon the Commencement Date set forth in the aforesaid notice from Lessor.

 

4.             Delay in Possession . If the Delivery Date has not occurred on or before December 31, 2011 (subject to a day for day extension of such date due to Tenant Delay as resaonbly determined by Lessor), Lessee shall have the right to terminate this Lease effective upon delivery of notice of such termination to Lessor.

 

5.             Abatement of Rent . If Lessee is prevented from using the Premises or any portion thereof, for three (3) consecutive days as a result of (a) any damage or destruction thereto; (b) any repair, maintenance or alteration performed by Lessor after the Commencement Date; (c) any failure to provide services or access to the Premises; (d) an eminent domain proceeding; or (e) the presence of any Hazardous Materials (defined below) which were not released by Lessee or its partners, affiliates, agents and employees (“Related Parties”), then rent shall be abated or reduced, as the case may be, after expiration of such three-day period for such time that Lessee continues to be so prevented from using the Premises or portion thereof, in the proportion that the rentable area of the portion of the Premises that Lessee is prevented from using bears to the total rentable area of the Premises.

 

6.             Real Property Taxes . Notwithstanding contrary provisions of Paragraph 4 of the Lease, any assessment, tax, fee, levy or charge which can reasonably be characterized as a real property tax, shall not include any increase in, or reassessment of, real property taxes and assessments resulting from either any sale, transfer, or other change in ownership of the building or from any major alterations, improvements, modifications or renovations to the building (“Real Property Taxes”).

 

7.             Audit Rights . Notwithstanding any provision of this Lease to the contrary, in the event of any dispute regarding the amount due as to Real Property Taxes, insurance or other costs or expenses described in the Lease (“Costs”), Lessee shall have the right, after five (5) business days prior written notice to Lessor and at reasonable times, to inspect and photocopy Lessor’s accounting records relating to such charges at Lessor’s office located at the address set forth below Lessor’s signature on the Lease. If, after such inspection and photocopying, Lessee continues to dispute the amount of Costs payable by Lessee, Lessee shall be entitled to retain an independent company or certified public accountant approved in advance by Lessor (which approval shall not be unreasonably withheld, conditioned or delayed) to audit and/or review Lessor’s records to determine the proper amount of the Costs. Such audit shall be completed within fifteen (15) business days. If such audit or review reveals that Lessor has overcharged Lessee, then within ten (10) business days after the results of such audit are made available to Lessor, Lessor shall reimburse Lessee the amount of such overcharge. If the audit reveals that Lessee was undercharged, then within five (5) business days after the results of the audit are made available to Lessee, Lessee shall reimburse Lessor the amount of such undercharge.

 

2



 

Lessee agrees to pay the cost of such audit. Lessor shall be required to maintain records of all Costs for the entirety of the twelve (12) month period following Lessor’s delivery to Lessee of each statement setting forth such costs.

 

8.             Compliance With Laws . Lessor represents and warrants to Lessee that as of the Commencement Date, the Premises have been constructed and operated in full compliance with all governmental regulations, ordinances, codes and laws which apply to the Premises, including, without limitation, laws and regulations pertaining to the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101, et seq., as amended, and regulations and advisory opinions pertaining to Hazardous Materials (“Applicable Laws”). Lessor shall construct the Base Building Improvements in compliance with Applicable Laws. Lessor shall be fully responsible for making any and all alterations and repairs to the Premises and the Base Building Improvements, required as a result of any failure by Lessor to comply with Applicable Laws.

 

9.             Right to Make Repairs . Notwithstanding any provision set forth in the Lease to the contrary, if Lessee provides written notice (or oral notice in the event of an emergency such as damage or destruction to the Structural Components and Building Systems) to Lessor of an event or circumstance which requires the action of Lessor with respect to repair and/or maintenance, and Lessor fails to provide such action within a reasonable period of time, given the circumstances, after the receipt of such notice, but in any event not later than twenty-one (21) days after receipt of such notice, then Lessee may proceed to take the required action upon delivery of an additional ten (10) business days’ notice to Lessor specifying that Lessee is taking such required action (provided, however, that neither of such notices shall be required in the event of an emergency which threatens life or where there is imminent danger of damage to the building), and if such action was required under the terms of the Lease to be taken by Lessor and was not taken by Lessor within such ten (10) business day period, then Lessee shall be entitled to prompt reimbursement by Lessor of Lessee’s reasonable costs and expenses in taking such action plus interest thereon equal to the Prime Rate then in effect at Bank of America, plus 2% (“Interest Rate”). In the event Lessee takes such action, and such work will affect the Structural Components and Building Systems, Lessee shall use only those contractors used by Lessor in the building for work on such Structural Components and Building Systems unless such contractors are unwilling or unable to perform, or timely and competitively perform, such work, in which event Lessee may utilize the services of any other qualified contractor which normally and regularly performs similar work in buildings comparable to the building. Furthermore, if Lessor does not deliver a detailed written objection to Lessee within thirty (30) days after receipt of an invoice by Lessee of its costs of taking action which Lessee claims should have been taken by Lessor, and if such invoice from Lessee sets forth a reasonably particularized breakdown of its costs and expenses in connection with taking such action on behalf of Lessor, then Lessee shall be entitled to deduct from rent payable by Lessee under the Lease, the amount set forth in such invoice. If, however, Lessor delivers to Lessee, within thirty (30) days after receipt of Lessee’s invoice, a written objection to the payment of such invoice, setting forth with reasonable particularity Lessor’s reasons for its claim that such action did not have to be taken by Lessor pursuant to the terms of the Lease or that the charges are excessive (in which case Lessor shall pay the amount it contends would not have been excessive), then Lessee shall not then be entitled to such deduction from rent, but as Lessee’s sole remedy, Lessee may proceed to claim a default by Lessor or, if elected by either Lessor or Lessee, the matter shall proceed to resolution by the selection of an arbitrator to resolve the dispute, which arbitrator shall be selected and

 

3



 

qualified pursuant to the procedures set forth herein, and whose costs shall be paid for by the losing party, unless it is not clear that there is a “losing party,” in which event the costs of arbitration shall be shared equally. If Lessee prevails in the arbitration, the amount of the award (which shall include interest at the Interest Rate (defined below) from the time of each expenditure by Lessee until the date Lessee receives such amount by payment or offset and attorneys’ fees and related costs) may be deducted by Lessee from the rents next due and owing under the Lease.

 

10.          Alterations and Additions . Lessee may make any alterations, additions and/or modifications to the Premises that do not adversely affect the Structural Components and Building Systems and do not cost in excess of Fifty Thousand Dollars ($50,000) in each instance without Lessor’s consent. Any other alterations, additions and/or modifications to the Premises by Lessee shall require Lessor’s prior consent, which shall not be unreasonably withheld, conditioned or delayed. In such event, however, Lessee shall give notice to Lessor of such alterations.

 

11.          Hazardous Materials . Lessor represents and warrants that no Hazardous Materials have been used, stored or released on, under, about or within the Premises in violation of any Applicable Laws. Lessor shall be fully responsible for any and all costs and expenses relative to the cleanup and/or remediation of any Hazardous Materials from the Premises existing as of the Delivery Date. Lessor and Lessee each agree that they shall not use, store or release, or permit any third party to use, store or release, any Hazardous Materials on, under, about or within the Premises in violation of Applicable Laws. “Hazardous Materials” means any substance, material or waste which is or becomes designated, classified or regulated as being “toxic” or “hazardous” or a “pollutant” (or a similar such designation) under any federal, state or local law, regulation or ordinance. Notwithstanding contrary provisions in the Lease, neither party shall be in violation of the Lease if using Hazardous Materials in compliance with the terms of Applicable Laws, including those regulating the useage, storage and disposal of the same.

 

12.          Reciprocal Indemnification . Notwithstanding any provisions of Paragraph 8 of the Lease to the contrary, Lessee shall not be required to indemnify and hold Lessor harmless from any loss, cost, liability, damage or expense, including, but not limited to, penalties, fines, attorneys’ fees or costs (collectively “Claims”), to any person, property or entity resulting from the acts, omissions or willful misconduct of Lessor or its agents, contractors, servants, employees or licensees in connection with Lessor’s activities in the building. Lessor shall indemnify and hold Lessee harmless from any such Claims, including but not limited to, Claims arising from any noncompliance of the Building with any laws relating to disabled access, or Claims arising from the presence in the Premises of Hazardous Materials, except to the extent such Hazardous Materials were placed in or on the Premises by Lessee (Lessor’s indemnity hereunder will survive the expiration of the Term of, or any termination of the Lease).

 

13.          Non-Disturbance . If, as of the date of execution of this Lease, there is any ground lease, deed of trust or other security instrument recorded against the property containing the Premises, Lessor shall, prior to the Commencement Date, obtain from the holder of each such encumbrance an agreement, in recordable form, that such holder shall recognize this Lease if such holder becomes the owner of the building through foreclosure or otherwise. Lessor shall

 

4



 

obtain a similar agreement from any holder of an encumbrance who may later come into existence.

 

14.          Assignment . Lessee may assign this Lease at any time without Lessor’s consent to (a) any Affiliate (as defined below) or any entity which owns or is owned by an Affiliate; (b) any entity acquiring substantially all of the assets of Lessee; or (c) another entity in connection with the merger of Lessee with such entity. In such event, however, Lessee shall give notice to Lessor of such assignment. Lessee may otherwise assign this Lease or sublease any part of the Premises with Lessor’s consent, which shall not be unreasonably withheld, conditioned or delayed beyond ten (10) business days after receipt of Lessee’s request therefor. Lessor’s failure to respond within such ten (10) business day period shall constitute consent to such assignment or sublease. For purposes of this Lease, “Affiliate” shall mean any entity which is controlled by (directly or indirectly) Lessee, or which controls (directly or indirectly) Lessee, or which is under common control with Lessee.

 

15.          Force Majeure . Any prevention, delay or stoppage caused by fire, earthquake, explosion, flood, hurricane, the elements, or any other similar cause beyond the reasonable control of the party from whom performance is required, or any of their contractors; acts of God or a public enemy; actions, restrictions, limitations or interference of governmental authorities or agents; war, invasion, insurrection, rebellion; riots; strikes or lockouts, or inability to obtain necessary materials, goods, equipment, services, utilities or labor shall excuse the performance of such party for a period equal to the duration of such prevention, delay or stoppage. Waiver of Consequential Damages. Notwithstanding any provision of the Lease or this Addendum to the contrary, neither Lessor or Lessee shall be liable to the other or any person or entity claiming by, through or under the other) for, and each hereby waives any claims with respect thereto, any consequential or special or indirect damages arising under or in connection with the Lease.

 

17.          Access . Except in the event of an emergency, Lessor shall provide Lessee with not less than twenty four (24) hours prior written notice before any entry onto the Premises for any purpose. At all times during such entry, Lessee shall have a right to have a representative present during such entry, and Lessor and its agents shall, at all times, comply with Lessee’s security and safety procedures.

 

18.          Signage . Lessor shall not permit or allow any sign or billboard to be placed in, on or around the building which identifies any person, company or entity which is a competitor of Lessee. Under no circumstances shall the building be named after or referred to utilizing the name of a competitor of Tenant. Tenant may transfer such sign rights to any assignee or sublessee.

 

[Remainder of page intentionally left blank]

 

5



 

IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum No. 1 to Lease as of the date of this Lease.

 

LESSOR:

 

 

 

 

 

/s/ Martin E. Harband

.

Martin E. Harband, Trustee

 

 

 

 

 

LESSEE:

 

 

 

LOCUS DEVELOPMENT, INC.

 

a Delaware corporation

 

 

 

By:

/s/ Sean E. George

 

 

 

 

Its:

President & CEO

 

 

6


 

***Confidential material redacted and filed separately with the Commission.

 

FIRST AMENDMENT TO LEASE

 

THIS FIRST AMENDMENT TO LEASE, dated for reference January 1, 2015, is made by and between Martin E Harband, Trustee, (“Lessor”) and Invitae Corporation, a Delaware corporation, successor-in-interest to Locus Development, Inc. (“Lessee”) with reference to the following fact:

 

A.             The parties made and executed a lease agreement, dated September 1, 2011, for the premises commonly known and designated as 458 Brannan Street, San Francisco, California.

 

B.             The parties now desire to amend the Lease in certain particulars.

 

NOW, THEREFORE, it is agreed as follows:

 

1. Term:                        Paragraph 1 of the Lease is amended in its entirety to read as follows:

 

The term of this Lease shall be for six (6) years , commencing September 1, 2011, and ending August 31, 2017.

 

2. Rent:                            Paragraph 2 of the Lease is amended to add the following:

 

Notwithstanding any provision to the contrary, commencing January 1, 2015 and ending August 31, 2017, the minimum monthly rent payable shall be $***.

 

3. Option .                  Paragraph 41 of the Lease is amended in its entirety to read as follow:

 

Lessee is granted the option to extend the term of the Lease for an additional five (5) years commencing September 1, 2017, and ending August 31, 2022 The option shall be exercised by written notice to Lessor on or before September 1, 2016, which date shall be known as the “Exercise Notice Date”. As a condition precedent to exercising such option, Lessee must be in lawful possession of the premises and not in default on the Exercise Notice Date, or in the thirty days prior thereto.

 

a.                    Rent.               The minimum monthly rent payable during the option term shall be in accordance with the following schedule:

 

(i)

$*** for the twelve months commencing September 1, 2017;

(ii)

$*** for the twelve months commencing September 1, 2018;

(iii)

$*** for the twelve months commencing September 1, 2019;

(iv)

$*** for the twelve months commencing September 1, 2020;

(v)

$*** for the twelve months commencing September 1, 2021.

 



 

b.               Early termination. Lessee may terminate the Lease after the thirtieth (30 th ) month of the option term, upon payment of five months’ rent, calculated from and after the termination date. Lessee shall give written notice of termination to Lessor not less than 90 days prior to the termination date.

 

4. Security Deposit . Paragraph 37 of the Lease is amended to add the following:

 

A.             At the commencement of the 5th lease-year (September 1, 2015), Lessee shall deposit with Lessor $10,461.00 to increase the Security Deposit to $27.061.00;

 

B.             At the commencement of the option term (September 1, 2017), Lessee shall deposit with Lessor $19,695.00 to increase the Security Deposit to $46,756.00.

 

5. Othe r teams and conditions: Except as provided herein, the lease shall remain unchanged.

 

LESSOR:

 

LESSEE:

 

 

 

/s/ Martin E. Harband

 

Invitae Corporation,

Martin E Harband, Trustee

 

a Delaware corporation

 

 

 

 

 

 

 

 

By

/s/ Sean E George

 

 

Its

Sean E George

Date:

12/30/2014

 

Date:

12/29/14

 




Exhibit 10.13

 

SUBLEASE

 

This Sublease (this “ Sublease ”), dated for reference purposes only as December 6, 2013, is entered into by and between SUTTER WEST BAY HOSPITALS, a California nonprofit public benefit corporation dba California Pacific Medical Center (“ Sublessor ”), formerly known as California Pacific Medical Center, a California nonprofit public benefit corporation, and INVITAE CORPORATION, a Delaware corporation (“ Sublessee ”), with reference to the following facts:

 

Recitals

 

A.             SKS Brannan Associates, LLC, a Delaware limited liability company (“ Original Lessor ”), as lessor, and Sublessor, as lessee, entered into that certain standard form office lease dated February 13, 2004 (the “ Lease ”), for those certain premises consisting of Forty-Two Thousand Six Hundred Forty-Seven (42,647) rentable square feet located at 475 Brannan Street, Suites 120, 130 and 220, San Francisco, California (the “ Original Leased Premises ”) for the Initial Term expiring on November 30, 2009.

 

B.             PRU/SKS Brannan Associates, LLC, a Delaware limited liability company (“ PRU/SKS ”), succeeded to the interest of Original Lessor.

 

C.             PRU/SKS and Sublessor entered into that certain first amendment to lease dated November 29, 2006 (the “ First Amendment ”), whereby, among other things, the Original Leased Premises were expanded to include the Expansion Space consisting of Nineteen Thousand One Hundred Eighty-Four (19,184) rentable square feet in the Building, including Suite 230 (the Original Leased Premises and Expansion Premises are referred to collectively as the “ Master Leased Premises ”), and the Term of the Lease was extended through February 28, 2017. The Lease and First Amendment are referred to collectively as the “ Master Lease ” and are attached hereto as Exhibit A and incorporated herein by this reference.

 

D.             CLPF — 475 Brannan Street, L.P., a Delaware limited partnership (“ Master Lessor ”), succeeded to the interest of PRU/SKS.

 

E.             Sublessee desires to sublease a portion of the Master Leased Premises commonly known as Suites 130 and 230 consisting of a total of Eight Thousand Eight Hundred Fifty-Two (8,852) rentable square feet (the “ Subleased Premises ”) and Sublessor is willing to sublease the Subleased Premises to Sublessee as of the Commencement Date (as defined below) upon the terms and provisions set forth in this Sublease.

 

F.             Sublessee and Sublessor desire to enter into this Sublease to memorialize their understanding regarding the sublease of the Subleased Premises.

 

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Agreement

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, Sublessor and Sublessee do hereby agree as follows:

 

1.             Incorporation of Recitals. The recitals are incorporated herein by this reference as though fully set forth.

 

2.             Definitions. Except as otherwise expressly provided in this Sublease to the contrary, any capitalized words shall have the meaning ascribed to them in the Master Lease.

 

3.             Commencement Date. The Commencement Date of this Sublease shall be December 15, 2013 (the “ Commencement Date ”).

 

4.             Sublease of Subleased Premises. Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor, effective as of the Commencement Date, the Subleased Premises as depicted on Exhibit B attached hereto and incorporated herein by this reference, for the Term (as defined below), subject to the terms and conditions of this Sublease, and further subject and subordinate to the terms and conditions of the Master Lease, as amended from time to time. Landlord shall deliver to Tenant Suite 230 as of the Commencement Date and Suite 130 as of February 1, 2014. Notwithstanding anything to the contrary in this Sublease, for the period commencing as of the Commencement Date and continuing through January 31, 2014, the term “ Subleased Premises ” shall refer to Suite 230 only, which consists of Five Thousand Three Hundred Ninety-Nine (5,399) rentable square feet.

 

5.             Term. The Term of this Sublease shall be for the period commencing as of the Commencement Date and expiring on February 28, 2017 (the “ Term ”). In the event that this Sublease is terminated for any reason during the first (1 st ) year of the Term hereof, the parties shall not enter into another arrangement for the sublease of the Subleased Premises as provided herein for a period of one (1) year from the Commencement Date. Upon the expiration or effective date of termination of this Sublease, all rights and obligations of the parties hereunder shall cease and terminate except that the parties shall perform fully any obligations under this Sublease arising on or prior to the date of expiration or termination and any other obligations that by their express terms survive the expiration of the Term or termination of this Sublease.

 

6.              Early Access. Sublessee shall be entitled to early access and use of the Subleased Premises to install cabling, place partition/modular component and other furniture, install telecommunication devices and other equipment and for other related purposes commencing as of the following dates: (a) upon full execution of this Sublease with respect to Suite 230 and (b) January 15, 2014 with respect to Suite 130. The foregoing right of early access and use is conditioned upon Sublessee’s compliance with all of the terms and conditions of this Sublease, except that Sublessee shall not be required to pay Base Rent for such early access and use of the Subleased Premises. Furthermore, Sublessee and its representatives shall be subject to all reasonable directives of Sublessor and Master Lessor in connection with such entry as well as

 

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the use of common areas within the Building and on the Property, including, but not limited to, restrooms, elevators, truck loading areas and other facilities. Sublessee agrees to inform its contractors of the reasonable rules and regulations pertaining to construction activities established, from time to time, by Sublessor and Master Lessor. Prior to the commencement of any construction in the Subleased Premises, Sublessee shall provide Sublessor and Master Lessor with a proposed work schedule for Sublessee’s contractors and other representatives.

 

7.             Rent.

 

a.             Subject to adjustment as provided in Section 7b of this Sublease, Sublessee’s base rent due hereunder commencing at the Commencement Date is equal to Sixty- Five and No/l00ths Dollars ($65.00) per rentable square foot per year or Forty-Seven Thousand Nine Hundred Forty-Eight and 33/100ths Dollars ($47,948.33) per month (“ Base Rent ”). Sublessee shall pay to Sublessor in advance on the first (1 st ) day of each and every calendar month during the Term, without deduction, offset, prior notice or demand, at such place or places as may be designated from time to time by Sublessor, Base Rent. If the Term of this Sublease commences or ends on a day other than the first (1 st ) day of a calendar month, then the rental for such period shall be prorated at one-thirtieth (1/30th) of the monthly amount for each day this Sublease is in effect during such period, and such rental shall be paid at the commencement of such period. Base Rent and other sums payable by Sublessee to Sublessor hereunder shall be paid in legal United States tender to Sublessor at the address designated below by Sublessor or at such other place as Sublessor may hereafter designate in writing. Notwithstanding the foregoing, for the period commencing as of the Commencement Date and continuing through January 31, 2014, Base Rent shall be calculated by multiplying the monthly rental rate by the rentable square footage of Suite 230 only.

 

b.              On the anniversary of the Commencement Date, and annually thereafter, the then current Base Rent shall be increased by five percent (5%).

 

8.             Security Deposit. Sublessee shall deposit with Sublessor the sum of One Hundred Ninety-One Thousand Seven Hundred Ninety-Three and 32/100ths Dollars ($191,793.32) (the “ Security Deposit ”) upon Sublessee’s execution of this Sublease as a security deposit for the faithful performance by Sublessee of all of the terms, covenants and conditions of this Sublease to be kept and performed by Sublessee during the Term hereof. Sublessee expressly waives the provisions of Civil Code section 1950.7. If Sublessee defaults with respect to any provision of this Sublease, including, but not limited to, the provisions relating to payment of Base Rent or any other monetary sums due hereunder, Sublessor may (but shall not be required to) use or apply all or any portion of the Security Deposit for any such unpaid Base Rent or other amount due hereunder or any sums that Sublessor may spend by reason of Sublessee’s default or to compensate Sublessor for any other loss or damage that Sublessor may suffer by reason of Sublessee’s default. If any portion of the Security Deposit is so used or applied, Sublessee shall, within ten (10) days after written demand therefore, deposit cash with Sublessor in an amount sufficient to restore the Security Deposit to its original amount; Sublessee’s failure to do so shall be a material breach of this Sublease. Sublessor shall not be required to keep the Security Deposit separate from its general funds and Sublessee shall not be entitled to interest thereon. If Sublessee shall fully and faithfully perforin every provision of this Sublease to be performed by Sublessee, the Security Deposit, or any balance thereof, shall be returned to

 

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Sublessee at the expiration of the Term of this Sublease and after Sublessee has vacated the Subleased Premises. Under no circumstances shall the Security Deposit be interpreted as being part of Base Rent.

 

9.             Late Charge. If any payment of rent, including, but not limited to, Base Rent, is not received by Sublessor within ten (10) days after its due date, then, without any requirement for notice to Sublessee, Sublessee shall pay to Sublessor as a late charge an additional amount equal to five percent (5%) of the overdue payment as liquidated damages in lieu of actual damages (other than interest under Section 10 of this Sublease and attorneys’ fees and costs under Section 36 of this Sublease). The parties agree that this late charge represents a reasonable estimate of the costs and expenses that Sublessor will incur because of any late payments of rent (other than interest and attorneys’ fees and costs). Such costs include, but are not limited to, processing and accounting charges and charges that may be imposed on Sublessor by Master Lessor under the Master Lease. Sublessor’s acceptance of any liquidated damages shall not constitute a waiver of Sublessee’s default with respect to the overdue amount or prevent Sublessor from exercising any of the rights and remedies available to Sublessor under this Sublease.

 

10.          Interest. In addition to the late charges referred to above, which are intended to defray Sublessor’s costs resulting from late payments, any payment from Sublessee to Sublessor not paid when due, including, but not limited to, Base Rent, shall bear interest from the date the payment is due until paid to Sublessor by Sublessee at the rate of ten percent (10%) per annum or the maximum lawful rate that Sublessor may charge to Sublessee under applicable laws, whichever is less. Acceptance of any interest shall not constitute a waiver by Sublessee’s default with respect to the overdue sum or prevent Sublessor from exercising any of its other rights and remedies under this Sublease.

 

11.          Holding Over. If Sublessee remains in possession of all or any part of the Subleased Premises after expiration or termination of this Sublease or if the term of the Master Lease expires or the Master Lease is terminated, and Sublessee fails to surrender all or any part of the Subleased Premises upon the date of such expiration or earlier termination of the Master Lease, possession of the Subleased Premises after such expiration or termination shall be unlawful and shall entitle Sublessor to immediate recovery of possession by summary proceedings as well as any and all damages resulting therefrom. Such unlawful possession further shall be subject to all of the terms and provisions of this Sublease except that Sublessee shall be responsible for the payment of an amount (on a per month basis without reduction for any partial months during the holdover) equal to two hundred percent (200%) of the Rent due for the period immediately preceding the holdover. No holdover by Sublessee or payment by Sublessee after the expiration of the Term or termination of this Sublease shall be construed to extend the Term or prevent Sublessor from immediate recovery of possession of the Subleased Premises by summary proceedings or otherwise. If Sublessor, as a result of Sublessee’s holdover (a) is unable to deliver possession of the Subleased Premises to a new subtenant, (b) is unable to perform improvements for a new subtenant or (c) otherwise is harmed or incurs costs, Sublessee shall be liable for any and all damages that Sublessor suffers from such holdover, whether in law or equity, including, but not limited to, liability and losses incurred by Sublessor with respect to the new subtenant. The provisions of this Section 11 are in addition to and do not affect

 

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Sublessor’s rights of reentry or any rights of Sublessor hereunder or as otherwise provided by law.

 

12.          Use and Restrictive Covenants. Sublessee shall use and occupy the Subleased Premises for general office use and life-science labs and for no other purpose whatsoever without the prior written consent of Master Lessor and Sublessor, which consent may be granted or withheld arbitrarily, capriciously, for no reason or for any reason. Sublessee further shall use and occupy the Subleased Premises in conformity with the terms and provisions in this Sublease and the Master Lease, including, but not limited to, the provisions of Article 5 of the Master Lease and such rules and regulations as may be adopted and modified, from time to time, by Sublessor or Master Lessor, including, but not limited to, the rules and regulations for the Building, and otherwise only in such manner as shall be consistent with Sublessor’s rights under the Master Lease. If, as a result of the nature of Sublessee’s use of the Subleased Premises, compliance with applicable laws requires structural modification of the Subleased Premises, then Sublessee shall be responsible for the cost thereof. Sublessor and Sublessee shall use commercially reasonable efforts to notify the other in writing if Sublessor or Sublessee, respectively, makes alterations to the Subleased Premises that might impact accessibility under federal and/or state disability access laws.

 

13.          Compliance with Laws. Sublessee shall, at Sublessee’s sole cost and expense, fully, diligently and in a timely manner comply with any and all applicable laws relating in any manner to condition, use or occupancy of the Subleased Premises by Sublessee. For purposes of this Sublease, “ applicable laws ” shall include all laws, rules, statutes, regulations, ordinances, directives, covenants, easements and restrictions of record, permits and the requirements of any applicable fire insurance underwriter or rating bureau or similar bodies now or hereafter constituted relating to or affecting the condition, use or occupancy of the Subleased Premises. Without limiting the generality of the foregoing, Sublessee shall comply with all requirements of the Americans with Disabilities Act of 1990 (42 United States Code section 12101 et seq.) and all amendments thereto and regulations promulgated thereunder and the State of California accessibility requirements, as the same may be amended from time to time (collectively, the “ ADA ”) and applicable laws pertaining to industrial hygiene; environmental conditions on, in, under or about the Subleased Premises, including soil and groundwater conditions; and the use, removal, storage and disposal of any Hazardous Substance. Sublessee acknowledges that to Sublessor’s actual knowledge the Building has not been inspected by a Certified Access Specialist (CASp), as defined in Section 55.52 of the Civil Code. Sublessee hereby expressly acknowledges and agrees that Sublessee has (A) received and executed a disability access obligations notice provided to Sublessee by Sublessor and (B) received a copy of the San Francisco Small Business Commission’s access information notice.

 

14.          Repairs and Maintenance. Sublessee shall be responsible for repairing any damage to the Subleased Premises and the Building caused by acts or omissions of Sublessee or Sublessee’s agents, employees, contractors, guests or invitees. Sublessee further shall, at Sublessee’s sole cost and expense, keep the Subleased Premises in a safe and tenantable condition and in first (l st )-class order, condition, repair and appearance.

 

15.          Alterations and Improvements. Sublessee shall not make or suffer to be made any alterations to or on the Subleased Premises, or any part thereof, without the prior

 

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written consent of Master Lessor and Sublessor, which consent may be withheld in their sole and absolute discretion for any reason or no reason. Sublessor and Master Lessor hereby consent to Sublessee using Southbay Construction and its union sub-contractors for purposes of making initial alterations to the Subleased Premises and using Corovan for moving and storage of certain personal property; provided, however, any such initial alterations shall be subject to the terms and provisions of this Section 15. Any approved alterations shall be completed by Sublessee at Sublessee’s sole cost and expense: (a) with due diligence, in a good and workmanlike manner, using new materials; (b) in compliance with plans and specifications approved by Sublessor and Master Lessor; (c) in compliance with the construction rules and regulations promulgated by Landlord from time to time; (d) in accordance with all applicable laws (including all work, whether structural or non-structural, inside or outside the Subleased Premises, required to comply fully with all applicable laws and necessitated by Sublessee’s work); and (e) subject to all conditions that Sublessor and Master Lessor may impose. Such conditions may include requirements for Sublessee to: (a) provide payment or performance bonds or additional insurance (from Sublessee or Sublessee’s contractors, subcontractors or design professionals); (b) use contractors or subcontractors designated by Sublessor; (c) remove all or part of the alterations prior to or upon expiration or termination of the Term, as designated by Sublessor or Master Lessor; and (d) have all work performed outside of normal business hours for the Building. If any work outside the Subleased Premises, or any work on or adjustment to any of the Building systems, is required in connection with or as a result of Sublessee’s work, such work shall be performed at Sublessee’s expense by contractors designated by Sublessor. Sublessor’s and Master Lessor’s right to review and approve (or withhold approval of) Sublessee’s plans, drawings, specifications, contractor(s) and other aspects of construction work proposed by Sublessee is intended solely to protect Sublessor and Master Lessor, the Building and Sublessor’s and Master Lessor’s interests. No approval or consent by Sublessor or Master Lessor shall be deemed or construed to be a representation or warranty by Sublessor or Master Lessor as to the adequacy, sufficiency, fitness or suitability thereof or compliance thereof with applicable laws or other requirements. All alterations shall upon installation become part of the realty and be the property of Sublessor or Master Lessor, subject to removal as provided herein. Before making any alterations, Sublessee shall submit to Sublessor and Master Lessor, for Sublessor’s or Master Lessor’s prior approval, reasonably detailed final plans and specifications prepared by a licensed architect or engineer; a copy of the construction contract, including the name of the contractor and all subcontractors proposed by Sublessee to make the alterations; and a copy of the contractor’s license. Sublessee shall reimburse Sublessor and Master Lessor upon demand for any expenses reasonably incurred by Sublessor and Master Lessor in connection with any alterations made by Sublessee, including reasonable fees charged by Sublessor’s and Master Lessor’s contractors or consultants to review plans and specifications prepared by Sublessee and to update the existing as-built plans and specifications of the Building to reflect the alterations. Sublessee shall obtain all applicable permits, authorizations and governmental approvals and deliver copies of the same to Sublessor and Master Lessor before commencement of any alterations. Sublessee acknowledges that installation of telephone lines, cables and other electronic telecommunications services and equipment shall be subject to this provision. Sublessee further acknowledges that the installation of voice equipment or low-voltage cabling that may result in Sublessee’s utilization of the Building’s telecommunications equipment rooms shall be subject to this provision. Any approved alterations or improvements to the Subleased

 

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Premises and removal thereof shall be completed strictly in accordance with and subject to the terms and provisions of this Sublease and the Master Lease.

 

16.          Auctions and Signs. Sublessee shall not conduct any auctions at the Subleased Premises. Sublessee shall have the right to its pro-rata share of directory signage in the Building entrance lobby directory. Such signage shall be at Sublessee’s sole cost and expense and subject to receipt of prior written consent from Master Lessor and Sublessor, and father subject to compliance by Sublessee with all applicable laws. Sublessee shall maintain and remove any signage in accordance with the terms of this Sublease and the Master Lease.

 

17.          Parking Rights. Sublessee is responsible, at its sole cost and expense, for obtaining parking, whether through Master Lessor, if available, or otherwise. Sublessee is not granted any parking rights whatsoever under this Sublease.

 

18.          Utilities and Services. Provided that Sublessee is not in default hereunder or under the Master Lease, the Subleased Premises will be furnished with reasonable quantities of (a) electric current for normal lighting and ordinary medical office equipment and machines twenty-four (24) hours per day, seven (7) days a week; (b) water for lavatory and drinking purposes; (c) climate control for the comfortable use and occupation of the Subleased Premises; and (d) janitorial service Monday through Friday, excluding holidays (excluding the disposal of Hazardous Substance and/or biohazard waste, for which Sublessee shall be solely responsible). Sublessor and Master Lessor shall not be liable for, and Sublessee shall not be entitled to, any abatement or reduction of Base Rent by reason of Sublessor’s or Master Lessor’s failure to furnish any of the foregoing when such failure is caused by accident, breakage, repairs, strikes, lockouts or other labor disturbances or labor disputes of any character or for any other causes beyond Sublessor’s or Master Lessor’s control. The term “ ordinary medical office equipment and machines ” shall include, but not be limited to, typewriters, adding machines, calculators, word processing and data processing equipment, Xerox-type copying equipment and lunchroom-type appliances such as one (1) or more refrigerators, one (1) or more microwave ovens and one (1) or more vending machines, all for the exclusive use of Sublessee’s employees.

 

19.          Master Lease Incorporation by Reference; Assumption. The following provisions of the Master Lease are expressly excluded from, and not made a part of, this Sublease: Section 1.04C ( Suite Numbers ); Section 1.04E ( Approximate Square Feet Within Premises ); Section 1.05 ( Term ); Section 1.06 ( Leasehold Improvements ); Section 1.07 ( Rent ); Section 1.09 ( Number of Parking Spaces ); Section 1.10 ( Brokers ); Section 2.01 ( Lease of Premises ); Section 2.03 ( Parking Rights ); Article 3 ( Term ); Section 4.01 ( Base Rent ); Section 4.03 ( Additional Rent ); Section 4.04 ( Payment ); Section 5.02 ( Compliance with Laws ); Section 5.04 ( Landlord’s Representation ); Section 5.05E; Section 5.06 ( Underground Storage Tank) ; Section 6.01 ( Initial) ; Section 6.02 ( Alterations ); Sections 7.01A and 7.01B; Section 7.03 ( Insurance ); Section 7.04B; Section 9.01 ( Events of Default ); Section 9.02 ( Termination ); Section 9.03 ( Continuation ); Sections 10.01A and 10.01F; Section 11.01 ( Brokers ); Section 11.14 ( Signs and Auctions ); Section 11.17 ( Adverse Condition ); Section 11.18 ( Condition of Premises at Expiration ); Section 11.26 ( Contingency ); Section 1 of the First Amendment; Section 2.2 of the First Amendment; Section 2.3 of the First Amendment; Section 3 of the First Amendment; Section 4 of the First Amendment; Section 5 of the First Amendment; Section 7 of the First Amendment; Section 8 of the First Amendment; Section 9 of the First Amendment;

 

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Section 10 of the First Amendment; Section 12 of the First Amendment; Section 13 of the First Amendment; Section 14 of the First Amendment; Section 16 of the First Amendment; Section 19 of the First Amendment; Section 23 of the First Amendment; and Section 24 of the First Amendment. Except as otherwise expressly provided herein to the contrary, this Sublease is subject to all of the terms of the Master Lease, which terms are incorporated by reference into, and made a part of, this Sublease.

 

Sublessee shall comply in all respects with and be bound by all of the terms and conditions of the Master Lease incorporated herein by reference and shall not permit any act or omission to act that will violate any of such provisions of the Master Lease. Without limiting the generality of the foregoing, Sublessor shall have all of the rights and remedies of Master Lessor and Sublessee shall assume, perform and comply with and be bound by all of the obligations, representations, warranties and covenants of Sublessor, as lessee, under the Master Lease with respect to the Subleased Premises, whether to Sublessor, Master Lessor, or otherwise, except as otherwise expressly provided herein. As between the parties to this Sublease only, in the event there is a conflict between the terms of the Master Lease and the terms of this Sublease, the terms of this Sublease shall control.

 

Sublessee recognizes that Sublessor is not in a position to render any of the services or perform the obligations required of Master Lessor under the Master Lease. Sublessee further acknowledges and agrees that the performance by Sublessor of any of its obligations under this Sublease is conditioned upon the performance of Master Lessor under the Master Lease. The parties expressly acknowledge and agree that Sublessor does not assume the obligations of Master Lessor under the provisions of the Master Lease, but shall exercise due diligence to cause Master Lessor to perform its obligations under the Master Lease for the benefit of Sublessee. Sublessor shall not be liable to Sublessee for any default of Master Lessor under the Master Lease.

 

20.          Amendments to Master Lease. Sublessor may execute any amendment or supplement to the Master Lease and may waive any breach thereof by Master Lessor and such amendment, supplement or waiver shall be fully effective, without necessity of consent by Sublessee, provided that Sublessee’s rights or obligations under this Sublease are not thereby materially and adversely affected. If, however, Sublessor does request written consent from Sublessee to any amendment or supplement to the Master Lease or to any waiver of breach by Master Lessor, Sublessee shall provide such written consent within ten (10) days after such request if the amendment, supplement or waiver does not materially and adversely affect Sublessee’s rights or obligations under this Sublease or if the request is otherwise reasonable under the circumstances.

 

21.          Termination of Master Lease. If the Master Lease is terminated, this Sublease shall automatically terminate and the parties shall be relieved from all liabilities and obligations under this Sublease except for the obligations accruing prior to termination, and except as otherwise provided herein or in the Master Lease, and except that if this Sublease terminates as a result of a default of one (1) of the parties under this Sublease or the Master Lease, or both, the defaulting party shall be liable to the nondefaulting party for all damage suffered by the nondefaulting party as a result of such termination. If Sublessor is given the right under the Master Lease to terminate the Master Lease, Sublessor shall have the right, in its sole

 

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discretion, to determine whether it wishes to terminate the Master Lease without liability of any kind whatsoever to Sublessee; provided, however, that Sublessor shall give to Sublessee notice of its intention to terminate the Master Lease after such decision to terminate is made and prior to the effective date thereof.

 

22.          Personal Property Taxes. Sublessee shall be liable for and shall pay before delinquency all taxes levied against any personal property or trade fixtures placed by Sublessee in or about the Subleased Premises. If the leasehold improvements in the Subleased Premises, whether installed and/or paid for by Master Lessor or Sublessor and whether affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation of leasehold improvements conforming to building standard work in other space in the Building are assessed, then the real property taxes and assessments levied against Master Lessor, Sublessor or the Subleased Premises by reason of such excess valuation shall be deemed to be taxes levied against personal property of Sublessee.

 

23.          Insurance.

 

a.             Sublessee shall during the entire Term hereof, at Sublessee’s sole cost and expense, obtain, maintain and keep in full force and effect, for the protection of Sublessee, Sublessor, Master Lessor and mortgagees of Master Lessor as their interest may appear, the following insurance:

 

(i)             Property Insurance (at least as broad as ISO Special Form Causes of Loss CP 1030) upon property of every description and kind owned by Sublessee and located in the Building or for which Sublessee is legally liable or installed by or on behalf of Sublessee, whether during the Term or during a prior occupancy of the Subleased Premises, including, without limitation, furniture, fittings, leasehold improvements, fixtures and any other personal property, in an amount not less than one hundred percent (100%) of the full replacement cost thereof with an agreed amount endorsement;

 

(ii)            Commercial General Liability Insurance (comparable to the ISO Commercial General Liability policy form CG 00 01), coverage to include personal injury, bodily injury, property damage, contractual liability, products and completed operations liability arising out of or relating (directly or indirectly) to Sublessee’s business operations, conduct, assumed liabilities or use or occupancy of the Subleased Premises or the Building in limits not less than Two Million Dollars ($2,000,000.00) per occurrence/Two Million Dollars ($2,000,000.00) annual aggregate;

 

(iii)         Worker’s Compensation Insurance, as required by California law, and Employers Liability Insurance with limits of One Million Dollars ($1,000,000.00) Per Accident/One Million Dollars ($1,000,000.00) Per Disease/One Million Dollars ($1,000,000.00) Policy Limit Insurance; and

 

(iv)           Business Automobile Bodily Injury and Property Damage Insurance covering all owned, hired and non-owned autos in a combined single limit of One Million Dollars ($1,000,000.00) each accident.

 

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b.             All policies shall be taken out with third party insurers admitted in California with an A.M. Best rating of A VII or better. The commercial general liability and automobile policies shall name Sublessor and Master Lessor as additional insureds. The additional insured status for the commercial general liability policy shall be secured through use of an endorsement comparable to the Commercial General Liability ISO form CG 20 11 (Additional Insured-Managers or Lessors of Premises). The property policy shall name Sublessor and Master Lessor as loss payees as respects their interests in the leasehold improvements. If any such insurance is written on a claims-made form, it shall continue for three (3) years following the expiration or termination of this Sublease and the insurance shall have a retroactive date prior to or coinciding with the earlier of the Commencement Date of this Sublease or such date upon which Sublessee is required to obtain insurance under the terms of this Sublease. In the event that a claims-made policy is canceled, non-renewed or converted to an occurrence policy, Sublessee shall obtain extended reporting (tail) coverage for the remainder of the three (3)-year period. Sublessee’s policies shall stipulate that the insurance is primary and that any insurance carried by Sublessor and Master Lessor shall be excess and not contributoiy. Sublessee agrees that certificates of insurance on the insurer’s standard form, with additional insured and loss payee endorsements attached, will be delivered to Sublessor and Master Lessor as soon as practicable after placing of the required insurance, but in no event later than ten (10) days after Sublessee takes possession of all or any part of the Subleased Premises. All policies shall contain an agreement by the insurers to notify Sublessor and Master Lessor and the mortgagees of Master Lessor in writing not less than thirty (30) days prior to any material change, reduction in coverage by endorsement, cancellation or other termination thereof. Not less than thirty (30) days prior to the expiration of each policy, a notice of renewal shall be delivered to Sublessor and Master Lessor. Sublessor and Master Lessor may request certified copies of Sublessee’s policies to be provided to Sublessor and Master Lessor, after ten (10) days written notice to Sublessee.

 

c.              In the event of damage to or destruction of the Building and the Subleased Premises also have been damaged, Sublessee will immediately pay to Sublessor and Master Lessor all of Sublessee’s insurance proceeds relating to the leasehold improvements and alterations in the Subleased Premises. In the event of damage to or destruction of the Building and the Subleased Premises have not been damaged, and Sublessor or Master Lessor terminates this Sublease, Sublessee will deliver to Sublessor and Master Lessor the leasehold improvements, the alterations and the Subleased Premises all in such condition as required by and otherwise in accordance with the provisions of this Sublease.

 

d.              Sublessee agrees that Sublessee will not keep, use, sell or offer for sale in or upon the Subleased Premises any article that may be prohibited by any insurance policy in force from time to time covering the Building, the Subleased Premises or the leasehold improvements. If Sublessee’s occupancy or conduct of business in or on the Subleased Premises, whether or not Sublessor and Master Lessor has consented to the same, results in any increase in premiums for the insurance carried from time to time by Sublessor and Master Lessor with respect to the Building, the Subleased Premises or the leasehold improvements, Sublessee shall pay any such increase in premiums as additional rent within ten (10) days after being billed therefor by Sublessor and Master Lessor. In determining whether increased premiums are a result of Sublessee’s use or occupancy of the Subleased Premises, a schedule issued by the organization computing the insurance rate in the Building or the leasehold improvements

 

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showing the various components of such rate, shall be conclusive evidence of the several items and charges that make up such rate. Sublessee shall promptly comply with all reasonable requirements of the insurance authority or of any insurer now or hereafter in effect relating to the Subleased Premises.

 

e.              If any insurance policy carried by Sublessor or Master Lessor shall be canceled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced in any way by reason of the use or occupation of the Subleased Premises, or any part thereof, by Sublessee or by any assignee or subtenant of Sublessee or by anyone permitted by Sublessee to be upon the Subleased Premises and, if Sublessee fails to remedy the condition giving rise to cancellation, threatened cancellation or reduction of coverage within forty-eight (48) hours after notice thereof, Sublessor or Master Lessor may, at Sublessor’s or Master Lessor’s option, either terminate this Sublease or enter upon the Subleased Premises and attempt to remedy such condition and Sublessee shall forthwith pay the cost thereof to Sublessor or Master Lessor as additional rent. Sublessor and Master Lessor shall not be liable for any damage or injury caused to any property of Sublessee or of others located in the Subleased Premises as a result of such entry. If Sublessor or Master Lessor shall be unable to remedy such condition, then Sublessor and Master Lessor shall have all of the remedies provided for in this Sublease in the event of a default by Sublessee. Notwithstanding the foregoing provisions of this Section 23, if Sublessee fails to remedy as aforesaid, Sublessee shall be in default of Sublessee’s obligation hereunder and Sublessor and Master Lessor shall have no obligation to attempt to remedy such default.

 

f.              Sublessor and Sublessee hereby waive and shall cause their respective insurance carriers to waive any and all rights of recovery, claims, actions or causes of action against the other for any loss or damage with respect to Sublessee’s fixtures or personal property, the tenant improvements, the Building and the Subleased Premises, or any contents thereof, including rights, claims, actions and causes of action based on negligence, which loss or damage is (or would have been, had the insurance required by this Sublease been carried) covered by insurance.

 

24.          Sublease As Is. Except as otherwise expressly provided herein, Sublessee hereby acknowledges and represents to Sublessor that Sublessee is accepting Sublessee’s interest in, and possession of, the Subleased Premises in their present condition “as is,” including, but not limited to, the physical condition and environmental aspects of the Subleased Premises, the nature and extent of the improvements that were installed in the Subleased Premises (such as, but not limited to, carpeting, wall and window coverings, electrical outlets, fire sprinkler system, lighting fixtures and air-conditioning ducts and returns, with Sublessor having no duty, and Sublessee having no right, to install or arrange for installation of any other improvements to, or any alterations of, the Subleased Premises) and all applicable laws and matters shown in the public records affecting or related to the Subleased Premises, or any part thereof, including, but not limited to, building and safety codes, zoning ordinances, land use restrictions and regulations and other such matters. Sublessee acknowledges and represents to Sublessor that neither Sublessor nor any agent or representative of Sublessor has made any representation, warranty or promise with respect to the Subleased Premises, or any part thereof, that is not expressly set forth in this Sublease; that Sublessee has satisfied itself with the condition of the Subleased Premises and the suitability of the Subleased Premises for Sublessee’s intended use; and that Sublessee has

 

11



 

made such investigations as Sublessee deems necessary with reference to the Subleased Premises and assumes all responsibility therefore as the same relate to Sublessee’s occupancy thereof.

 

25.          Regulatory Matters. Sublessor and Sublessee enter into this Sublease with the intent of conducting their relationship and implementing the agreements contained herein in full compliance with applicable federal, state and local law, including, but not limited to, the Medicare/Medicaid Anti-Kickback statute and the Federal Anti-Referral or “Stark Law”, and the regulations promulgated thereunder, as amended from time to time. Notwithstanding any unanticipated effect of any of the provisions of this Sublease, neither party will intentionally conduct itself under the terms of this Sublease in a manner that would constitute a violation of these laws. The parties each acknowledge and agree that the compensation to be paid to Sublessor by Sublessee pursuant to this Sublease is intended to be consistent with fair market value for the sublease of the Subleased Premises and has been determined in an arms-length transaction. The parties acknowledge and agree that no payment made under this Sublease is intended to induce the referral of patients or the purchasing, leasing or ordering of any other products or services or the recommending of the purchasing, leasing or ordering of any other products or services. Nothing in this Sublease is intended to obligate and shall not obligate either party to refer any patients to the other, or to any family member. The parties shall comply with all applicable laws that require disclosure of financial interests or relationships between parties to whom referrals may be made.

 

26.          Indemnification and Exculpation. Sublessee agrees to indemnify and hold Sublessor and Master Lessor, and their respective partners, members, shareholders, officers, directors and employees, harmless from and against any and all liabilities, losses, costs, expenses, fines, penalties and claims of any kind whatsoever, including, without limitation, any loss or damage to property of Master Lessor, Sublessor, Sublessee or any other person or any claim or liability arising from any injury to or death of any person, which arises from or is in any way related to: (a) the Subleased Premises; (b) the use and occupancy of the Subleased Premises by Sublessee and Sublessee’s employees, contractors, agents, invitees and licensees or any other party; (c) any activity, work or other thing done, permitted or suffered by Sublessee in or about the building in which the Subleased Premises exists, including, but not limited to, the handling of hazardous materials; (d) any breach or default by Sublessee of any of Sublessee’s obligations under this Sublease or the Master Lease; or (e) any acts, omissions or negligence of Sublessee, Sublessee’s agents, employees, invitees, licensees or contractors. Sublessee shall, at Sublessee’s expense, and by counsel satisfactory to Sublessor and Master Lessor, defend Sublessor and Master Lessor in any action or proceeding arising from any such claim and shall indemnify Sublessor and Master Lessor against all costs, attorneys’ fees, expert witness fees and any other expenses incurred in such action or proceeding.

 

This Sublease is made on the express condition that Sublessor shall not be liable for, or suffer loss or incur any liability by reason of, injury to or death of any person or persons or damage to or loss of use of property, from whatever cause in any way connected with the condition or use of the Subleased Premises or personal property or fixtures therein or thereon or connected with activities of Sublessee or any of Sublessee’s employees, agents, invitees, contractors or licensees, including, without limitation, any and all liability for injury to or death of, or damage to or loss of the use of the property of, Sublessee or any of Sublessee’s employees, agents, invitees, contractors or licensees, except to the extent caused solely by the gross

 

12



 

negligence or willful misconduct of Sublessor. Without limiting the generality of the foregoing, Sublessor shall not be liable for injury or damage that may be sustained by the person or property of Sublessee, Sublessee’s employees, invitees or customers or any other person in or about the Subleased Premises, that is caused by or results from fire, steam, electricity, gas, water, rain, that may leak or flow from or into any part of the Subleased Premises, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, whether such damage or injury results from conditions arising upon the Subleased Premises, from the roof, street or subsurface or from any other sources. Sublessor further shall not be liable for injury to Sublessee’s business or any loss of income therefrom or any damages arising from any act or omission of any other tenant, occupant or user of the building in which the Subleased Premises exists. In the event that any of the foregoing events or situations occurs, Sublessee agrees to look solely to Master Lessor for recovery pursuant to the terms and provisions of the Master Lease and not to Sublessor. The provisions of this Section 26 shall survive the expiration or earlier termination of this Sublease.

 

27.          Default.

 

a.             Sublessee shall be in default of Sublessee’s obligations under this Sublease if any of the following events occur (“ Event of Default ”): (i) Sublessee fails to pay any rent or sums equivalent to rent within five (5) days of when due, including, but not limited to, Base Rent; (ii) except as otherwise provided in Subsection 27a(i) above, Sublessee breaches any representation, warranty or covenant made by Sublessee in this Sublease, including, but not limited to, Sublessee’s covenant to comply in all respects with the terms and conditions set forth in the Master Lease, or fails to observe or perform any term, covenant or condition of this Sublease to be performed by Sublessee and such failure continues for twenty (20) days after written notice thereof from Sublessor; provided, however, that if the nature of Sublessee’s breach is such that more than twenty (20) days are reasonably required for its cure, Sublessee shall not be deemed to be in default if Sublessee has commenced such cure within such twenty (20)-day period and thereafter diligently prosecutes such cure to completion, which completion shall occur not later than sixty (60) days from the date of such notice from Sublessor; or (iii) Sublessee is in default under the Master Lease.

 

b.              In the Event of Default by Sublessee that extends beyond any applicable notice and cure period under any of Sublessee’s obligations under this Sublease or under any of Sublessee’s obligations under the Master Lease as a sublessee of Sublessor, then, and in that event, Sublessor shall have the right and option to terminate this Sublease and Sublessee’s right to possession of the Subleased Premises and to recover from Sublessee rent and sums equivalent to rent and other amounts owed under this Sublease, including Base Rent and interest thereon at the rate of ten percent (10%) per annum, and damages as allowed under California law, including, but not limited to, the worth at the time of award (computed by discounting at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%)) of the amount by which the unpaid rent and sums equivalent to rent required to be paid by Sublessee under this Sublease for the balance of the Term of this Sublease after the time of award exceed the amount of such rental loss as Sublessee proves could be reasonably avoided.

 

13



 

c.              Efforts by Sublessor to mitigate damages caused by Sublessee’s default shall not constitute a waiver by Sublessor of any of Sublessor’s rights or remedies under this Sublease or the Master Lease. Neither acts of repair, alteration, maintenance or preservation of the Subleased Premises, nor efforts to relet the Subleased Premises, nor the appointment of a receiver or trustee, whether in bankruptcy proceedings, or otherwise, upon initiative of Sublessor to protect Sublessor’s interests under this Sublease, shall constitute an election by Sublessor to terminate this Sublease or Sublessee’s right to possession of the Subleased Premises.

 

d.              The rights and remedies of Sublessor under this Section 27 shall be in addition to all other rights and remedies provided to Sublessor in this Sublease, in the Master Lease or by law, whether now in force or hereafter enacted, including, but not limited to, injunctions and other equitable relief.

 

28.          Surrender. On the expiration or earlier termination of the Term of this Sublease, Sublessee shall quit the Subleased Premises and surrender possession to Sublessor in accordance with this Section 28. Sublessee shall leave the Subleased Premises in first (l st )-class sanitary condition, repair and appearance, reasonable and normal wear and tear excepted, and otherwise in compliance with the Master Lease. For purposes of this Sublease, the term “reasonable and normal wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice by Sublessee. On expiration or termination, Sublessee shall, without expense to Sublessor or Master Lessor, remove or cause to be removed from the Subleased Premises (a) all debris and rubbish; (b) any items of furniture, equipment, freestanding cabinet work and other articles of personal property owned by Sublessee or installed or placed by Sublessee at Sublessee’s expense in the Subleased Premises; (c) any similar articles of any other persons claiming under Sublessee that Sublessor or Master Lessor, in Sublessor’s or Master Lessor’s sole discretion, requires to be removed; (d) all telephone, data processing, audio and video, security and electrical (other than electrical wiring terminating at or connected to building standard outlets) cables, wires, lines, duct work, sensors, switching equipment, control boxes and related improvements, in compliance with the National Electric Code or other applicable law, unless Sublessor or Master Lessor elects to retain any of the foregoing, in which case, those items that Sublessor or Master Lessor has elected to retain shall be left by Sublessee in good condition and working order, lien free and properly labeled; (e) any signage placed in, on or about the Subleased Premises by Sublessee or on behalf of Sublessee; and (f) any alterations, installations, additions, modifications or improvements that Sublessee makes to the Subleased Premises, whether during the Term of this Sublease, that Sublessor or Master Lessor, in Sublessor’s or Master Lessor’s sole discretion, requires to be removed. Sublessee shall, at Sublessee’s sole expense, repair all damage or injury that may occur to the Subleased Premises caused by Sublessee’s removal of any of the foregoing items and shall restore the Subleased Premises to their original condition. Any property described in this Section 28 not removed from the Subleased Premises by Sublessee upon the expiration or sooner termination of this Sublease shall, at Sublessor’s or Master Lessor’s option, become the property of Sublessor or Master Lessor or Sublessor or Master Lessor may remove or cause to be removed such property for Sublessee’s account, in which case Sublessee shall reimburse Sublessor or Master Lessor for the cost of removal (including the cost of repairing any damage to the Subleased Premises caused by removal) and storage and a reasonable charge for Sublessor’s or Master Lessor’s overhead within ten (10) days after Sublessor or Master Lessor gives Sublessee a statement thereof. Sublessee waives all claims against Sublessor and Master Lessor for any damage or loss to Sublessee

 

14



 

resulting from Sublessor’s or Master Lessor’s removal, storage, retention or disposition of any such property. Upon expiration or termination of this Sublease or of Sublessee’s possession, whichever is earliest, Sublessee shall surrender all keys to the Subleased Premises and shall deliver to Sublessor all keys for or make known to Sublessor the combination of locks on all safes, cabinets and vaults that may be located in the Subleased Premises. Sublessee’s obligations under this Section 28 shall survive the termination of this Sublease.

 

29.          Notice of Additional Space. Sublessor will use commercially reasonable efforts to notify Sublessee if any other portion of the Master Leased Premises becomes available for Sublease. Sublessor shall have no responsibility to sublease such available space to Sublessee nor shall Sublessor have any liability if Sublessor fails to notify Sublessee of any such space becoming available.

 

30.          Time of Essence. Time is of the essence of each and every provision of this Sublease.

 

31.          Ambiguities. This Sublease has been negotiated at arm’s length and between persons sophisticated and knowledgeable in the matters dealt with in this Sublease. Accordingly, any rule of law (including Civil Code section 1654) or legal decision that would require interpretation of any ambiguities in this Sublease against the party that has drafted it is not applicable and is waived. The provisions of this Sublease shall be interpreted in a reasonable manner to effect the purpose of the parties.

 

32.          Force Majeure. Subject to the provisions of the Master Lease, if either Sublessor or Sublessee is delayed, hindered in or prevented from the performance of any act required under this Sublease by reason of strikes, lock-outs, labor troubles, inability to procure standard materials, failure of power, restrictive governmental laws, regulations or orders, or governmental action or inaction (including failure, refusal or delay in issuing permits, approvals and/or authorizations) (that is not the result of the action or inaction of the party claiming such delay), riots, civil unrest or insurrection, war, terrorism, bioterrorism, fire, earthquake, flood or other natural disaster, unusual and unforeseeable delay that results from an interruption of any public utilities (e.g., electricity, gas, water, telephone) or other unusual and unforeseeable delay not within the reasonable control of the party delayed in performing work or doing acts required under the provisions of this Sublease, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. The provisions of this Section 32 shall not operate to excuse Sublessee from prompt payment of rent, including, but not limited to, Base Rent, or either party from any other payments required under the provisions of this Sublease.

 

33.          Section Headings. The headings of sections in this Sublease are inserted for convenience of reference only and shall not be construed to limit or extend or otherwise affect in any way the meaning of any part of this Sublease.

 

34.          Severability. If any provision of this Sublease, to any extent, shall be determined by a court of competent jurisdiction or an arbitrator to be invalid or unenforceable, the remainder of this Sublease shall not be affected thereby, and each and every provision of this Sublease shall be valid and enforceable to the fullest extent permitted by law, unless the effect of

 

15



 

such severance would be to substantially alter this Sublease or the obligations of the parties, in which case this Sublease may be immediately terminated.

 

35.          Assignment and Subletting. Sublessee’s interest in this Sublease is not assignable, in whole or in part, either voluntarily or by operation of law, nor shall Sublessee’s interest in this Sublease be encumbered by deed of trust, mortgage or otherwise, nor shall Sublessee have the right to sublet or license or allow another party to use or occupy the Subleased Premises, or any part thereof, without the prior written consent of Sublessor and Master Lessor, which consent may be withheld in their sole and absolute discretion for any reason or no reason. Sublessor or Master Lessor further shall have the right to condition the giving of any such consent, including, but not limited to, requiring that the proposed sublessee, assignee or licensee deposit with Sublessor or Master Lessor a security deposit for the faithful performance of all of the terms, covenants and conditions of this Sublease to be kept and performed by Sublessee during the Term hereof. Such security deposit, if required, shall be paid to Sublessor and/or Master Lessor prior to the effective date of any such proposed sublease, assignment or license. Sublessee shall, upon demand, reimburse Sublessor for all attorneys’ fees and reasonable costs incurred by Sublessor in connection with the review and/or preparation of documents in connection with any such proposed assignment, subletting, license, encumbrance, use or occupation. In the event any assignment, subletting, license, encumbrance, use or occupation, to which Sublessor and Master Lessor has consented, results in ADA compliance requirements, the transferee shall bear all costs and expenses associated with such ADA compliance requirements. Any assignment, subletting, license, encumbrance, use or occupation without the written consent of Sublessor and Master Lessor as provided herein shall be void and shall, at the option of Sublessor or Master Lessor, constitute a material breach of this Sublease. If Sublessee is a corporation, partnership or other entity, a change of ownership, whether voluntarily or by operation of law, and whether in one (1) transaction or as a cumulative result of more than one (1) transaction, of fifty percent (50%) or more of the interest in Sublessee shall constitute an assignment by Sublessee of this Sublease requiring consent from Sublessor and Master Lessor as above provided. Sublessee hereby waives and discharges any claims it may have against Sublessor and Master Lessor for damages arising from Sublessor’s or Master Lessor’s withholding or conditioning its consent. Sublessee shall indemnify, defend and hold harmless Sublessor and Master Lessor from any and all liability, losses, claims, damages, costs, expenses, causes of action and proceedings involving any third party or parties (including, but not limited to, Sublessee’s proposed assignee or subtenant) who claim that they were damaged by Sublessor’s or Master Lessor’s withholding or conditioning of its consent. Any assignment or subleasing otherwise shall be in compliance with the provisions of Article 10 of the Master Lease.

 

36.          Attorneys’ Fees.

 

a.             If Sublessor or Sublessee should institute any legal action, arbitration, proceeding or other action to recover possession of the Subleased Premises, to recover any sum due under this Sublease or the Master Lease, because of the breach of any provision of this Sublease or the Master Lease or for any other relief against the other party hereunder, then all costs and expenses, including reasonable attorneys’ fees and fees and costs of expert witnesses, incurred by the prevailing party therein, including those incurred in connection with preparing and serving any notices or other acts necessary to bring a proceeding on any

 

16



 

provision of this Sublease or any post-judgment or post-award proceeding to enforce any judgment or award, shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment or award. This provision is separate and several and shall survive the merger of this provision into any judgment or award.

 

b.             In the event that Sublessor uses an attorney(s) for the enforcement or interpretation of this Sublease, or any part thereof; or the collection of any rent or sums equivalent to rent due or to become due hereunder; or the recovery of possession of the Subleased Premises, whether or not suit is commenced or judgment entered; or due to any bankruptcy petition filed by Sublessee or Sublessee’s guarantor, if any, Sublessee shall pay to Sublessor, upon demand, all of Sublessor’s reasonable attorneys’ fees and costs, and failure to pay shall be deemed to be a material default.

 

37.           Change in Law. In the event of any legislative or regulatory change (including any change in Medicare or Medicaid policy) or determination, whether federal or state, that has or would have a significant adverse impact on either party hereto, or if legal counsel knowledgeable in health care matters reasonably determines that in the event of an audit or investigation, this Sublease is likely to be challenged by any governmental agency as illegal or improper or result in potential sanctions, fines, penalties or exclusion from the Medicare or Medi-Cal programs, or in the case of Sublessor, loss of tax-exempt status or its ability to obtain tax-exempt financing, the affected party shall have the right to require that the other party renegotiate the terms of this Sublease to either enter into a new sublease (to the extent required under applicable laws, including, without limitation, the Stark Law) or an amendment to this Sublease that brings this Sublease into compliance with the law without materially affecting the contemplated economic benefits and burdens of the original arrangement; provided, however, if Sublessor, in the exercise of its reasonable judgment, believes immediate termination of this Sublease is required by or to be in compliance with applicable laws or if the relationship reflected herein poses immediate jeopardy to Sublessor’s tax-exempt status or ability to obtain tax-exempt financing, Sublessor may terminate this Sublease upon written notice to Sublessee. If the parties fail to reach an agreement to amend or enter into a new sublease satisfactory to both parties within thirty (30) days of the request for renegotiation, the party requesting such renegotiation may terminate this Sublease upon written notice to the other party if such party believes, in the exercise of its reasonable discretion, that continuation of this Sublease creates serious potential risk for such party.

 

38.          Notices. All written notices to be given in connection with this Sublease shall be sufficient if personally delivered or sent by facsimile (together with proof of transmission); First-Class Mail or certified or registered mail, postage prepaid; or national overnight delivery service addressed to the party entitled to receive such notice at the address specified below by such party or changed by written notice in accordance with this Section 37. Notice shall be effective as follows: (a) when personally delivered to the recipient, notice is effective on delivery; (b) when mailed by certified or registered mail with return receipt requested, notice is effective on receipt if delivery is confirmed by a return receipt; (c) when delivered by overnight delivery with charges prepaid or charged to the sender’s account, notice is effective on delivery if delivery is confirmed by the delivery service; (d) when mailed by First-Class Mail through the United States Postal Service, notice is effective three (3) days after the

 

17



 

date of mailing; or (e) when sent by facsimile, notice is effective upon confirmation of receipt, provided that any notice given by facsimile shall be considered to have been received on the next business day if it is received after 5 p.m. (recipient’s time) or on a nonbusiness day. Any correctly addressed notice that is refused, unclaimed or undeliverable because of an act or omission of the party to be notified shall be considered to be effective as of the first (1 st ) date that the notice was refused, unclaimed or considered undeliverable by the postal authorities, messenger or overnight delivery service.

 

39.          Inspection and Entry. Sublessor may inspect the Subleased Premises, during business hours and upon reasonable advance notice to Sublessee, with or without Sublessee’s presence, for any lawful purpose, excluding Sublessee’s vaults, safes and files and individual offices that Sublessee regularly keeps locked during non-business hours to comply with confidentiality requirements of patients. Sublessor may enter the Subleased Premises without advance notice to Sublessee in case of emergency. Sublessee shall not add or change any lock, locking device, bolt or latch on the Subleased Premises and Sublessee acknowledges that Sublessor is entitled to a key to the Subleased Premises and may use the same for entry as provided herein except as otherwise provided hereinabove.

 

40.          Brokerage Fees. If Sublessee has dealt with any person or real estate broker in respect of subleasing or renting space in the Building, Sublessee solely shall be responsible for the payment of any fee due said person or firm and shall hold Sublessor and Master Lessor free and harmless against any liability in respect thereto.

 

41.          Entire Sublease/Amendment. This Sublease, including any and all exhibits, constitutes the entire understanding and agreement between the parties as to those matters contained in it and supersedes any and all prior or contemporaneous agreements, representations and understandings of the parties. This Sublease may be amended at any time by mutual agreement of the parties, but any such amendment must be in writing, dated and signed by the parties and attached hereto.

 

42.          Waiver of Jury Trial. Section 11.22 of the Master Lease hereby is incorporated into this Sublease to the extent the same is permitted by applicable law.

 

43.          Joint and Several. If there be more than one (1) Sublessee, the obligations hereunder imposed upon Sublessee shall be joint and several. If there is more than one (1) party constituting Sublessee, each such co-subtenant hereby grants to all of the other co-subtenants the right and authority to act individually on behalf of all co-subtenants, as Sublessee, with respect to this Sublease, including, but not limited to, renewing, modifying or terminating the same.

 

44.          Waiver. Any failure of a party to insist upon strict compliance with any term, undertaking or condition of this Sublease shall not be deemed to be a waiver of such term, undertaking or condition unless the same is in writing and signed and dated by the parties.

 

45.          Governing Law. This Sublease shall be governed by and construed in accordance with the laws of the State of California.

 

18



 

46.             Counterparts. This Sublease may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall be deemed one (1) and the same instrument.

 

47.             Third Party Beneficiaries. Unless otherwise expressly provided, this Sublease shall not create any third-party beneficiary rights for any person or entity.

 

48.             Covenants. The parties hereto agree that all provisions hereof are to be construed as both covenants and conditions as though the words importing such covenants and conditions were used in each separate paragraph hereof.

 

49.             Execution. By their signatures below, each of the following represent that they have authority to execute this Sublease and to bind the party on whose behalf their execution is made.

 

IN WITNESS WHEREOF, the parties have executed this Sublease, or caused this Sublease to be executed on its behalf.

 

SUBLESSOR:

SUBLESSEE:

 

 

SUTTER WEST BAY HOSPITALS, a

INVITAE CORPORATION, a Delaware

California nonprofit public benefit

corporation

corporation dba California Pacific Medical

 

Center

 

 

 

 

 

 

 

 

 

 

By:

/s/ Grant Davies

 

 

By:

/s/ Grant Davies

Grant Davies, EVP & CEO

 

Its:

PRESIDENT & CEO

Dated:

12/11/13

 

 

Dated:

16 DEC 2013

 

 

 

 

 

 

 

 

Address:

 

 

 

California Pacific Medical Center

 

 

 

Property Management Department

By:

 

 

2351 Clay Street, Suite 201

Its:

 

 

San Francisco, California 94115

Dated:

 

 

(415) 600-1985 (facsimile)

 

 

 

 

 

Address:

With a copy to:

 

 

 

 

 

 

Invitae Corporation

 

Sutter Health Facility & Property

 

458 Brannan Street

 

Services

 

San Francisco, California 94107

 

Attn: Director of Real Estate

 

(415) 520-9486 (facsimile)

 

2880 Gateway Oaks Drive

 

 

 

Suite 220

 

 

 

Sacramento, California 95833

 

 

 

(916) 566-4801 (facsimile)

 

 

 

19


 

EXhibit A

 

MASTER LEASE

 

(SEE ATTACHED)

 


 

LEASE

 

475 Brannan Street

San Francisco, California

 

SKS BRANNAN ASSOCIATES, LLC,

a Delaware limited liability company

 

LANDLORD

 

and

 

CALIFORNIA PACIFIC MEDICAL CENTER,

a California non-profit public benefit corporation

 

TENANT

 



 

TABLE OF CONTENTS

 

 

 

 

Page

ARTICLE 1

TERMS AND DEFINITIONS

 

1

1.01

General

 

1

1.02

Landlord

 

1

1.03

Tenant

 

1

1.04

Premises

 

2

1.05

Term

 

2

1.06

Leasehold Improvements

 

2

1.07

Rent

 

3

1.08

Intended Use

 

3

1.09

Number of Parking Spaces

 

3

1.10

Brokers

 

3

1.11

Exhibits

 

3

ARTICLE 2

PREMISES AND APPURTENANCES

 

4

2.01

Lease of Premises

 

4

2.02

Common Area

 

4

2.03

Parking Rights

 

5

ARTICLE 3

TERM

 

6

3.01

Term

 

6

3.02

Possession and Commencement

 

7

3.03

Options

 

8

3.04

Holding Over

 

12

ARTICLE 4

RENT

 

12

4.01

Base Rent

 

12

4.02

Reserved

 

13

4.03

Additional Rent

 

13

4.04

Payment

 

20

ARTICLE 5

USE

 

21

5.01

Use

 

21

5.02

Compliance with Laws

 

21

5.03

Nuisance and Waste

 

22

5.04

Landlord’s Representation

 

22

5.05

Compliance with Environmental Laws and Other Environmental Matters

 

23

5.06

Underground Storage Tank

 

25

ARTICLE 6

CONDITION OF PREMISES

 

31

6.01

Initial

 

31

6.02

Alterations

 

32

6.03

Maintenance and Repair

 

34

6.04

Reserved

 

36

6.05

Entry by Landlord

 

36

6.06

Access; Control

 

37

ARTICLE 7

UTILITIES; TAXES; INSURANCE

 

38

7.01

Utilities

 

38

7.02

Other Taxes Payable by Tenant

 

41

 

i



 

TABLE OF CONTENTS

(Continued)

 

 

 

 

Page

7.03

Insurance

 

41

7.04

Indemnification

 

45

ARTICLE 8

DAMAGE OR DESTRUCTION; TAKING

 

46

8.01

Insured Casualty

 

46

8.02

Release

 

47

8.03

Abatement

 

48

8.04

Force Majeure

 

48

8.05

Uninsured Casualty

 

48

8.06

Extent of Repair

 

48

8.07

Waiver

 

49

8.08

Eminent Domain

 

49

ARTICLE 9

DEFAULT AND REMEDIES

 

50

9.01

Events of Default

 

50

9.02

Termination

 

51

9.03

Continuation

 

52

9.04

Entry

 

53

9.05

Landlord’s Right to Perform

 

53

9.06

Rights Cumulative

 

53

ARTICLE 10

SUCCESSORS

 

54

10.01

Assignment and Subletting

 

54

10.02

Successors and Assigns

 

60

10.03

Surrender of Premises

 

60

10.04

Definition of Landlord

 

60

ARTICLE 11

MISCELLANEOUS

 

61

11.01

Brokers

 

61

11.02

Protection of Lenders

 

61

11.03

Estoppel Certificate; Financial Statements

 

62

11.04

Rules and Regulations

 

63

11.05

Conflict of Laws

 

63

11.06

Attorneys’ Fees

 

63

11.07

Reserved

 

63

11.08

Waiver

 

64

11.09

Terms and Headings

 

64

11.10

Time

 

64

11.11

Prior Agreements; Amendments

 

64

11.12

Separability

 

64

11.13

Force Majeure

 

64

11.14

Signs and Auctions

 

65

11.15

Accord and Satisfaction

 

65

11.16

Quiet Enjoyment

 

65

11.17

Adverse Condition

 

65

11.18

Condition of Premises at Expiration

 

66

11.19

Notices

 

66

11.20

Abandonment

 

67

11.21

Landlord’s Liability

 

67

 

ii



 

TABLE OF CONTENTS

(Continued)

 

 

 

 

Page

11.22

Waiver of Jury Trail

 

68

11.23

Diminution of Light, Air and View

 

68

11.24

Authority

 

68

11.25

Miscellaneous

 

69

11.26

Contingency

 

69

 

iii


 

STANDARD FORM OFFICE LEASE

 

THIS LEASE is made as of the 13 th  day of February, 2004 (the “ Lease Date ”), by and between Landlord and Tenant, who agree as follows:

 

ARTICLE 1

TERMS AND DEFINITIONS

 

1.01        General . When used in this Lease, the following terms shall have the following meanings which are agreed to and form part of this Lease.

 

1.02        Landlord .

 

A.            Name : SKS BRANNAN ASSOCIATES, LLC,

a Delaware limited liability company

 

B.            Address for Notices :

c/o SKS Investments LLC

500 Treat Avenue, Suite 200

San Francisco, California 94110

Attn: Mr. Paul E. Stein

 

1.03        Tenant .

 

A.            Name : CALIFORNIA PACIFIC MEDICAL CENTER,

a California non-profit public benefit corporation

 

B.            Address for Notices :

 

Prior to the Commencement Date :

California Pacific Medical Center

2200 Webster, Suite 514

San Francisco, California 94115

Attention: David R. Fielder

 

After the Commencement Date :

California Pacific Medical Center

475 Brannan Street, Suite 220

San Francisco, California 94107

Attention: David R. Fielder

 

With a copies at all times to :

California Pacific Medical Center

2333 Buchanan

First Floor

 

1



 

San Francisco, California 94115

Attn: Jack Bailey

 

and to:

 

USF Real Estate Brokerage Services, Inc.

2200 River Plaza Drive, 3rd Floor West

Sacramento, California 95833

Attention: Christopher J. Ott

 

1.04        Premises .

 

A.            Leased Space . Those certain premises described in Section 2.01 below.

 

B.             Building Address .             475 Brannan Street

San Francisco, California

 

C.             Suite Numbers :                Suites 120, 130 and 220.

 

D.            Floor(s) Upon Which the Premises Are Located : First and Second Floors.

 

E.            Approximate Square Feet Within Premises : 42,647 rentable square feet.

 

1.05        Term .

 

A.            Initial Term : Five (5) years.

 

B.            Commencement Date : The “ Commencement Date ” shall be the date which is the earlier of (a) substantial completion of that portion of Tenant’s Work relating to the vivarium lab to be located in the Premises (as more fully described in the Work Letter), and (b) December 1, 2004; provided, however, that the December 1, 2004 deadline may be delayed as provided in Section 3.02.

 

C.            Options to Extend : As set forth in Section 3.03.

 

1.06        Leasehold Improvements . The aggregate of Landlord’s Work and Tenant’s Work as more fully set forth in the Work Letter.

 

2



 

1.07        Rent .

 

A.            Base Rent :

 

Lease Years

 

Monthly

 

Annually (per sq. ft.)

 

Annual Base Rent

 

 

 

 

 

 

 

 

 

Suites 120 and 130 — 28,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Year 1

 

$

62,319.67

 

$

26.50

 

$

747,830.00

 

Lease Year 2

 

$

64,670.83

 

$

27.50

 

$

776,050.00

 

Lease Years 3-5

 

$

70,550.00

 

$

30.00

 

$

846,600.00

 

 

 

 

 

 

 

 

 

Suite 220 14,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Years 1-5

 

$

18,033.75

 

$

15.00

 

$

216,405.00

 

 

Option Terms                                As determined pursuant to Sections 3.03

 

B.            Number of Months Rent Abated : Zero.

 

C.            Tenant’s Percentage : 17.45%.

 

D.            Late Charge : Four percent (4%).

 

E.            Security Deposit . None.

 

1.08        Intended Use . A biotech molecular research lab with a small vivarium component and supporting office functions for such lab.

 

1.9          Number of Parking Spaces . 42 parking spaces.

 

1.10        Brokers .                        Colliers International — Landlord’s Broker

 

USI Real Estate Brokerage Services Inc. — Tenant’s Broker

 

1.11        Exhibits .

 

A.            Floor Plan Showing Premises

 

B.            Work Letter

 

C.            Confirmation of Term of Lease

 

3



 

D.            Rules and Regulations

 

E.            Construction Rules and Regulations

 

F.             List of Existing Furniture

 

ARTICLE 2

PREMISES AND APPURTENANCES

 

2.01        Lease of Premises . Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the “ Premises ” defined as a portion of that certain building located at 475 Brannan Street, San Francisco, California (the “ Building ”), containing approximately 12,967 rentable square feet of lab space located on the first floor and designated as Suite 120, approximately 15,253 rentable square feet of lab space located on the first floor and designated as Suite 130, and approximately 14,427 rentable square feet located on the second floor and designated as Suite 220, totaling approximately 42,647 rentable square feet, all as outlined on the Floor Plans attached hereto as Exhibit A, with Landlord’s Work as defined in the work letter attached as Exhibit B (the “ Work Letter ”) completed and containing the UST and Generator Equipment (as defined in Section 5.06), the lab equipment listed on Schedule 1 to the Work Letter, and the furniture listed on Exhibit F (the “ Existing Furniture ”) which is currently located in the Premises. During the Term, Tenant shall have the right to use the UST and Generator Equipment, the lab equipment and the Existing Furniture subject to the terms and conditions of this Lease. The Premises exclude the common stairways, stairwells, hallways, accessways and pipes, conduits, wires and appurtenant fixtures serving exclusively or in common other parts of the Building.

 

The parties hereto agree that such lease is upon and subject to the terms, covenants and conditions set forth in this Lease. Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of the terms, covenants and conditions to be kept and performed by it hereunder.

 

2.02        Common Area . Tenant shall have the nonexclusive right to use in common with other tenants in the Building and their respective visitors and licensees and subject to the Rules

 

4



 

and Regulations referred to in Section 11.04 below, the following areas appurtenant to the Premises:

 

A.            The common entrances, lobbies, restrooms, elevators, stairways and accessways, loading docks, ramps, drives and platforms and any passageways and serviceways thereto, and the common pipes, conduits, wires and appurtenant equipment serving the Premises; and

 

B.            Common walkways and sidewalks necessary for access to the Building.

 

2.03        Parking Rights . Tenant shall have the right during the term of this Lease to lease, on a non-exclusive basis, the number of parking spaces specified in Section 1.09, all of which shall be located in the subterranean garage adjacent to the Building. Additional parking spaces may be leased by Tenant on a monthly basis (terminable by Landlord or Tenant on thirty (30) days’ prior written notice) to the extent not leased by others. The rental rate for any parking space lease by Tenant shall be One Hundred Fifty Dollars ($150.00) per month per parking space during the first year of the Initial Term of this Lease. Thereafter, the monthly rental rate for each parking space leased by Tenant shall be the then-current monthly rental rate charged to other tenants in the Building, but in no event shall the monthly rental rate exceed Two Hundred Dollars ($200.00) at any time during the Initial Term of this Lease. If Tenant exercises Option A to extend the term of this Lease, then the monthly rental rate for each parking space leased by Tenant at any time during the Option Term shall not exceed Two Hundred Dollars ($200.00). If Tenant exercises Option B to extend the term of the Lease, the monthly rental rate for each parking space leased by Tenant shall be the then-current rate charged to other tenants in the Building from time to time during the Option Term. The use of Tenant’s parking spaces shall be for the parking of motor vehicles used by Tenant, its officers and employees only. The parking rental payable by Tenant hereunder shall include all taxes imposed on the use of the parking spaces by any governmental or quasi-governmental authority. Parking rental shall be due and payable in advance, as additional rent, on the first day of each month during which parking spaces are leased hereunder. Parking spaces may not be assigned or transferred separate and apart from this Lease, and upon the expiration or earlier termination of this Lease, Tenant’s rights with respect to all leased parking spaces shall immediately terminate. Tenant and its

 

5



 

officers and employees shall not unreasonably interfere with the rights of Landlord or others entitled to use the garage. Access to the garage will generally be available on a twenty-four (24) hour basis, with in and out privileges. The use of the garage by Tenant, its officer and employees shall be subject to all applicable laws and the garage shall be subject to the reasonable control and management of Landlord who may from time to time establish, modify, and enforce reasonable, uniform and nondiscriminatory rules and regulation with respect thereto. Landlord reserves the right to change, reconfigure, or rearrange the parking areas, to reconstruct or repair any portion thereof, and to restrict the use of any parking areas without such actions being deemed an eviction of Tenant or a disturbance of Tenant’s use of the Premises and without Landlord’s being deemed in default hereunder; provided that Landlord shall use commercially reasonable efforts to minimize (to the extent consistent with applicable laws) the extent and duration of any resulting interference with Tenant’s parking rights. In the event that such activities unreasonably interfere with Tenant’s use of the garage and parking rights, rent for the parking spaces leased by Tenant shall be abated to the extent of such interference. Landlord may, in its sole discretion, convert the garage to a reserved and/or controlled parking facility, or operate the garage (or a portion thereof) as an attendant assisted and/or valet parking facility. Landlord reserves the right at any time to designate areas for Tenant’s leased parking in a location mutually acceptable to Landlord and Tenant and otherwise in a reasonable manner, and Tenant shall thereafter be responsible for insuring that its officers and employees park in the designated areas.

 

ARTICLE 3

TERM

 

3.01        Term . The Initial Term of this Lease shall be for the period designated in Section 1.05, beginning on the Commencement Date and ending on the expiration of such period, unless the term shall be sooner terminated as hereinafter provided. Upon commencement of the Initial Term, the parties shall complete and sign the Confirmation of Term of Lease attached as Exhibit C . This Lease shall be a binding contractual obligation effective upon the execution and delivery hereof by Landlord and Tenant, notwithstanding the later commencement of the Initial Term of this Lease.

 

6



 

3.02        Possession and Commencement . Landlord shall deliver the Premises to Tenant in its “as is” condition (except as otherwise provided in Sections 5.05E and 6.01 of this Lease and Section 2 of the Work Letter) on the later of (a) the date which is three (3) business days after the date Tenant provides Landlord with written notice of issuance of the building permit required for construction of Tenant’s Work (as defined in the Work Letter) or (b) June 1, 2004 (the “ Possession Date ”). Landlord shall use reasonable efforts to deliver the Premises as soon as possible after the current tenant vacates the Premises. If Landlord, for any reason, cannot deliver possession of the Premises to Tenant in the condition required hereunder within sixty (60) days after the anticipated Possession Date (a “ Possession Delay ”), Tenant shall have the right to terminate this Lease by delivering written notice to Landlord within three (3) business days after the end of such sixty (60) day period, unless Landlord delivers the Premises to Tenant within ten (10) days after such notice. Unless the Premises are delivered before the expiration of such ten (10) day period, Landlord shall be liable to Tenant for all actual, out-of-pocket losses and damages resulting therefrom. Tenant shall have no other remedies or resources for such failure by Landlord. If Tenant elects not to terminate this Lease, the Commencement Date, the Initial Term and the Options shall be extended by the length of the Possession Delay. In the event of a Possession Delay, Tenant shall have the right to postpone its election to terminate to a specified date, and may make such election on the later date specified in a written notice to Landlord delivered within ten (10) days after the anticipated Possession Date. If Tenant’s Work is not completed on the sixth (6th) month anniversary of the date the Premises is delivered to Tenant due to any Force Majeure Delay or Landlord Delay, the Commencement Date shall be delayed one (1) day for each day that completion of any Tenant Work is delayed due to such Force Majeure Delay or Landlord Delay. The term “ Force Majeure Delay ” shall mean any delay in completion of the Tenant Work which is attributable to Force Majeure (as defined below). The term “ Landlord Delay ” shall mean any delay in completion of the Tenant Work which is attributable to the act or omission of Landlord, its employees, agents or contractors. The period from the Possession Date until the Commencement Date shall be the “ Build-Out Period ” during which the term of this Lease shall not have commenced, but all obligations and rights of the parties hereunder shall be in effect, except that Tenant’s obligation to pay Base Rent, Tenant’s Percentage of Operating Expenses and all other charges shall not commence until the Commencement Date. Notwithstanding anything to the contrary contained in this Section 3.02,

 

7



 

prior to June 1, 2004, Landlord shall deliver to Tenant possession of Suite 220 and that portion of the first floor of the Premises commonly referred to as Zone 1 within three (3) business days after Tenant’s written request provided that (a) Tenant has previously delivered to Landlord notice of issuance of the building permit required for construction of Tenant’s Work, and (b) if Tenant subsequently terminates the Lease pursuant to this Section 3.02 due to Landlord’s failure to deliver possession of the balance of the Premises, Landlord shall not be liable to Tenant for the increased losses and damages incurred by Tenant attributable to Tenant’s early possession of the Premises. As amplification of the foregoing, Landlord shall be liable to Tenant for all actual, out-of-pocket loss and damage resulting from Landlord’s failure to deliver possession of the Premises except those losses and damages that would not have been incurred by Tenant but for Tenant’s early possession of a portion of the Premises.

 

3.03        Options .

 

A.            Tenant is granted the right to exercise either of the two following renewal options, but not both: (a) three (3) consecutive options to extend the term of this Lease for one (1) year each with respect to the entire Premises only (“ Option A ”) or (b) two (2) consecutive options to extend the term of this Lease for five (5) years each with respect to the entire Premises only (“ Option B ”), on the terms and conditions set forth herein. If Tenant elects to exercise any extension rights under Option A, then Option B shall automatically terminate, and if Tenant elects to exercise any rights under Option B, then Option A shall automatically terminate. Any option under Option A or Option B shall be referred to as an “ Option ” and the renewal term pursuant to the exercise of any Option shall be referred to as an “ Option Term ”. The first Option to extend the Term of the Lease shall be exercised by giving Landlord written notice not less than twelve (12) months prior to the expiration of the Initial Term of Tenant’s intention to extend the term and of Tenant’s election to extend pursuant to Option A or Option B. If Tenant exercises Option A, the second and third Option to extend the term shall be exercised, if at all, by giving Landlord written notice not more than twelve (12) months and not less than one hundred eighty(180) days prior to the expiration of the term, as previously extended. If Tenant exercises Option B, the second Option to extend the term shall be exercised, if at all, by giving Landlord written notice not more than eighteen (18) months and not less than twelve (12) months prior to the expiration of the term, as previously extended. If Tenant exercises an Option, all references

 

8



 

in this Lease to the “term” shall mean the term, as so extended. Notwithstanding the foregoing, if there is an uncured monetary Default (as defined in Section 9.01 hereof) or an uncured material non-monetary Default after notice and beyond applicable cure periods on the date Tenant exercises its Option, Landlord shall have the right to terminate the Option , in which event this Lease shall expire on the then-current expiration date of the term.

 

B.            If Tenant elects to exercise Option A, the Base Rent during an Option Term shall be the greater of: (i) the Base Rent as of the last month of the Initial Term or the immediately preceding Option Term, as applicable or (b) ninety-five percent (95%) of the projected prevailing market rental rate for Comparable Space (as defined below) for a term commencing on or about the commencement date of the applicable Option Term; or if Tenant elects to exercise Option B, the Base Rent during an Option Term shall be ninety-five percent (95%) of the projected prevailing market rental rate for Comparable Space for a term commencing on or about the commencement date of the applicable Option Term (in either case, the “ Market Rate ”). For this purpose, “ Comparable Space ” shall mean office and lab space that is (i) comparable in size, location, and quality to the Premises; (ii) leased for a term comparable to the Option Term; (iii) with respect to the portion of the Premises used for office purposes, located in the Building or other comparable office buildings in the “South of Market” vicinity of the Building; and (iv) with respect to the portion of the Premises used for lab purposes, located in comparable lab space in San Francisco, or if less than three (3) comparable lab spaces are available in San Francisco at the time of determination of the Market Rate, then comparable lab space in San Francisco and South San Francisco. In determining the Market Rate, the parties shall include all escalations and take into consideration (a) free rent and other rental abatement concessions, if any, being granted to tenants in connection with the Comparable Space; and (b) tenant improvements or allowances provided or to be provided for the Comparable Space, taking into account the value of the existing improvements in the Premises to Tenant, based on age, quality, and layout of the improvements. The Market Rate for an Option Term shall be calculated pursuant to Section 3.03C below. Such calculations as agreed upon by Tenant and Landlord as stated below shall be final and shall not be recalculated at the actual commencement of such Option Term.

 

9


 

C.            Market Rate shall be determined as follows:

 

(1)           If Tenant provides Landlord with notice of exercise pursuant to Section 3.03A., then, not later than nine (9) months prior to the commencement of the applicable Option Term, Landlord shall deliver to Tenant a good faith written proposal of the Market Rate for the Premises for the Option Term. Within twenty-one (21) days after receipt of Landlord’s proposal, Tenant shall notify Landlord in writing (a) that Tenant accepts Landlord’s proposal or (b) that Tenant elects to submit the determination of Market Rate to arbitration in accordance with Section3.03C(3) below. If Tenant does not give Landlord a timely notice in response to Landlord’s proposal, Landlord’s proposal of Market Rate for the Option Term shall be binding upon Tenant.

 

(2)           If Tenant timely elects to submit the determination of Market Rate to arbitration, Landlord and Tenant shall first negotiate in good faith in an attempt to determine the Market Rate for the Option Term. If Landlord and Tenant are able to agree within thirty (30) days following the delivery of Tenant’s notice to Landlord electing arbitration (or if Tenant accepts Landlord’s initial proposal), then such agreement shall constitute a determination of Market Rate for purposes of this Section, and the parties shall immediately execute an amendment to this Lease stating the Market Rate and the Base Rent for the Option Term. If Landlord and Tenant are unable to agree on the Market Rate within such negotiating period, then within fifteen (15) days after the expiration of such negotiating period, the parties shall meet and concurrently deliver to each other in envelopes their respective good faith estimates of the Market Rate (set forth on a net effective rentable square foot per annum basis) (respectively, “ Landlord’s Estimate ” and “ Tenant’s Estimate ”). Landlord’s Estimate may not be more or less than its initial proposal of Market Rent. If the higher of such estimates is not more than one hundred five percent (105%) of the lower, then the Market Rate shall be the average of the two. Otherwise, the dispute shall be resolved by arbitration in accordance with subsection (3) below.

 

(3)           Within seven (7) days after the exchange of Landlord’s Estimate and Tenant’s Estimate, the parties shall each select as an arbitrator a licensed California real estate broker, who has at least ten (10) years active experience leasing office space located in the vicinity of the Premises immediately prior to his or her appointment (a “ Qualified Arbitrator ”).

 

10



 

If one party shall fail to select a Qualified Arbitrator within the seven (7) day period, then the Market Rent for the applicable Option Term shall be the Estimate submitted by the other party pursuant to Section 3.03C(2). If two Qualified Arbitrators are appointed, Landlord’s and Tenant’s Qualified Arbitrators shall work together in good faith to agree upon which of the two Estimates more closely reflects the Market Rate of the Premises for the applicable Option Term. The Estimate selected by such Qualified Arbitrators shall be binding upon Landlord and Tenant. If the two Qualified Arbitrators cannot agree upon which of the two Estimates more closely reflects the Market Rate within forty-five (45) days after appointment of the second Qualified Arbitrator to be appointed, then, within ten (10) days after expiration of such forty-five (45) day period, the two Qualified Arbitrators shall select a third Qualified Arbitrator (the “ Independent Arbitrator ”). If an Independent Arbitrator has not been so selected by the end of such ten (10) day period, then either party, on behalf of both, may request such appointment by the local office of the American Arbitration Association (or any successor thereto), or in the absence, failure, refusal or inability of such entity to act, then either party may apply to the presiding judge for the San Francisco Superior Court, for the appointment of such an Independent Arbitrator, and the other party shall not raise any question as to the court’s full power and jurisdiction to entertain the application and make the appointment. Within five (5) days following notification of the identity of the Independent Arbitrator so appointed, Landlord and Tenant shall submit copies of Landlord’s Estimate and Tenant’s Estimate to the three arbitrators (the “ Appraisal Panel ”). The Appraisal Panel shall conduct a hearing, at which Landlord and Tenant may each make supplemental oral and/or written presentations, with an opportunity for rebuttal by the other party and for questioning by the members of the Appraisal Panel, if they so wish. Within a reasonable time following the hearing, the Appraisal Panel, by majority vote, shall select either Landlord’s Estimate or Tenant’s Estimate as the Market Rate, and shall have no right to propose a middle ground or to modify either of the two proposals or the provisions of this Lease. The Appraisal Panel shall attempt to render a decision within fifteen (15) business days after appointment. In any case, the Appraisal Panel shall render a decision within thirty (30) days after appointment. The decision of the Appraisal Panel shall be final and binding upon the parties, and may be enforced in accordance with the provisions of California law. In the event of the failure, refusal or inability of any member of the Appraisal Panel to act, a successor shall be appointed in the manner that applied to the selection of the member being replaced. Each party shall pay the fees

 

11



 

and expenses of the Qualified Arbitrator designated by such party, and one-half of the fees and expenses of the Independent Arbitrator, if any, and the expenses incident to the proceedings (excluding attorneys’ fees and similar expenses of the parties which shall be borne separately by each of the parties.

 

(4)           Until the matter is resolved by agreement between the parties or a decision is rendered in any arbitration commenced pursuant to this Section 3.03, Tenant’s monthly payments of Base Rent shall be in an amount equal to the average of Landlord’s Estimate and Tenant’s Estimate. Within ten (10) business days following the resolution of such dispute by the parties or the decision of the arbitrators, as applicable, Tenant shall pay to Landlord, or Landlord shall pay to Tenant, the amount of any deficiency or excess, as the case may be, in the Base Rent theretofore paid.

 

3.04        Holding Over . If Tenant holds over after the expiration or earlier termination of the term of this Lease without the express written consent of Landlord, Tenant shall become a tenant at sufferance only, on all the terms set forth herein, except that the Base Rent shall be an amount equal to one hundred twenty-five percent (125%) of the Base Rent in effect upon the date of such expiration; provided, however, if Landlord notifies Tenant in writing that Landlord has entered into a new lease for the Premises commencing after the expiration or earlier termination of this Lease, together with reasonable evidence of such new lease, and Tenant fails to surrender the Premises, Base Rent during such hold-over period shall be an amount equal to one fifty percent (150%) of the Base Rent in effect upon the date of such expiration. Acceptance by Landlord of rent after such expiration or earlier termination shall not constitute a consent by Landlord to such holding over or result in a renewal or extension. The provisions of this section are in addition to and do not affect Landlord’s rights of re-entry or any rights of Landlord hereunder or as otherwise provided by law.

 

ARTICLE 4

RENT

 

4.01        Base Rent . Tenant agrees to pay Landlord the Base Rent designated in Section 1.07A, each in advance on or before the first day of each and every calendar month during the term. If the term of this Lease commences or ends on a day other than the first day of a calendar

 

12



 

month, then the rental for such period shall be prorated at one-thirtieth of the monthly amount for each day this Lease is in effect during such period, and such rental shall be paid at the commencement of such period. Base Rent shall be subject to any periodic increase specified in Section 1.07A.

 

4.02        Reserved

 

4.03        Additional Rent . In addition to the Base Rent, Tenant agrees to pay additional rent as and when provided in this Section 4.03 and elsewhere in this Lease. (Base Rent and all such additional rent shall be referred to collectively herein as “ Rent ”.)

 

A.            For the purposes of this section and Section 1.07, the following terms are defined as follows:

 

Land ”: the parcel(s) of land on which the Building and the adjacent below-grade parking garage are located.

 

Lease Year ”: each successive twelve (12) month period during the Term, beginning on the Commencement Date, except that if the Commencement Date does not occur on the first day of a calendar month, the first Lease Year shall include the balance of the month in which the Commencement Date occurs and the next succeeding twelve (12) months. The second and subsequent Lease Years shall commence on the first day of the month following the last month of the first Lease Year and shall continue for the next succeeding twelve (12) months.

 

Real Property ”: collectively, the Land, the Building, the adjacent below-grade parking garage and the other improvements on the Land.

 

Real Property Taxes ”: all taxes, assessments (whether general or special), excises, transit charges, housing fund assessments or other housing charges, levies or fees, ordinary or extraordinary, unforeseen as well as foreseen, of any kind, that are assessed, levied, charged, confirmed or imposed on the Real Property or any part thereof, on the Landlord with respect to the Real Property, on the act of entering into this Lease or any other lease of space in the Real Property, on the use or occupancy of the Real Property or any part thereof, with

 

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respect to services or utilities consumed in the use, occupancy or operation of the Real Property, or on or measured by the rent payable under this Lease or in connection with the business of renting space in the Real Property, including, without limitation, any gross income tax or excise tax levied with respect to the receipt of such rent, by the United States of America, the State of California, the City and County of San Francisco, any political subdivision, public corporation, district or other political or public entity or public authority, and shall also include any other tax, fee or other excise, however described, which may be levied or assessed in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other Real Property Taxes. Real Property Taxes shall include reasonable attorneys’ fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Real Property Taxes. Real Property Taxes shall not include income, franchise, gift, transfer, estate, excess profit, succession, inheritance or capital stock taxes unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord in lieu of, or as a substitute for, or as an addition to, any other charge that would otherwise constitute a part of Property Taxes; and fines, penalties or interest imposed due to Landlord’s failure to pay Real Property Taxes when due, unless Landlord’s failure is caused by Tenant’s act or omission.

 

Tenant’s Percentage ”: That portion of the total rentable area of the Building occupied by Tenant as set forth as a percentage in Section 1.07C above. As of the Lease Date, the total rentable area of the Building is 244,389 square feet.

 

Operating Expenses ”: the total actual costs and expenses incurred by Landlord in connection with the management, operation, maintenance, and repair of the Real Property, including, without limitation, the following costs (except to the extent otherwise excluded as an Operating Expense pursuant to this Section 4.03A): (1) salaries, wages, bonuses and other compensation (including hospitalization, medical, surgical, retirement plan, pension plan, union dues, life insurance, including group life insurance, welfare and other fringe benefits, and vacation, holidays and other paid absence benefits) relating to employees of Landlord, at the rank of property manager or below, or its agents directly engaged in the day-to-day management, operation, repair, or maintenance of the Real Property and costs of training such employees; (2) payroll, social security, workers’ compensation, unemployment and similar taxes with respect to such employees of Landlord or its agents, and the cost of providing disability or other benefits

 

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imposed by law or otherwise, with respect to such employees; (3) uniforms (including the cleaning, replacement and pressing thereof) provided to such employees; (4) premiums and other charges incurred by Landlord with respect to fire, earthquake, other casualty, boiler and machinery, theft, rent interruption, liability insurance, any other insurance as is deemed necessary or advisable in the reasonable judgment of Landlord, or any insurance required by the holder of a first mortgage lien on the Real Property, all in such amounts as Landlord determines to be appropriate, and the actual costs incurred in repairing an insured casualty to the extent of the deductible amount (not in excess of Twenty-Five Thousand Dollars ($25,000.00) per casualty event during Lease Years 1 through 5, not in excess of Thirty Thousand Dollars ($30,000.00) per casualty event during Lease Years 6 through 10 if the lease term is extended, and not in excess of Thirty-Five Thousand Dollars ($35,000.00) per casualty event during Lease Years 11 through 15 if the lease term is extended) under the applicable insurance policy; (5) water charges and sewer rents or fees; (6) license, permit and inspection fees and charges; (7) sales, use and excise taxes on goods and services purchased by Landlord in connection with the operation, maintenance or repair of the Real Property and building systems and equipment; (8) telephone, telegraph, postage, stationery supplies and other expenses incurred in connection with the operation, maintenance, or repair of the Real Property; (9) management fees and expenses (including fees and expenses for accounting, financial management, data processing and information services) not to exceed amounts customarily charged by property managers who manage comparable properties in the “South of Market” area similar in size and character to the Building; (10) repairs to and physical maintenance of the Real Property, including building systems and appurtenances thereto and normal repair and replacement of worn-out equipment, facilities and installations; (11) exterior window cleaning, guard, extermination, water treatment, rubbish removal from common areas, plumbing and other services and inspection or service contracts for elevator, electrical, mechanical, sanitary, heating, ventilation and air conditioning, and other building equipment and systems or as may otherwise be necessary or proper for the operation or maintenance of the Real Property; (12) supplies, tools, materials and equipment used in connection with the operation, maintenance or repair of the Real Property; (13) accounting, legal and other professional, consulting or service fees and expenses; (14) painting the exterior or the public or common areas of the Building and the cost of maintaining the sidewalks, landscaping and other common areas of the Real Property; (15) all actual costs and expenses for electricity,

 

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chilled water, air conditioning, water for heating, gas, fuel, steam, heat, lights, sewer service, communications service, power and other energy related utilities required in connection with the operation, maintenance and repair of the Real Property, including the Premises and the premises of other tenants to the extent not separately metered or submetered; (16) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord after the Lease Date required under any governmental law, regulation or insurance requirement with which the Real Property was not required to comply prior to the Lease Date, such cost or allocable portion to be amortized over the useful life thereof, together with interest on the unamortized balance at a rate per annum equal to the Reference Rate (defined below) charged at the time such capital improvements or capital assets are constructed or acquired or such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing or acquiring such capital improvements or capital assets, but in either case not more than the maximum rate permitted by law at the time such capital improvements or capital assets are constructed or acquired (the “ Amortization Rate ”); (17) the cost of any capital improvements made by Landlord to the Building or capital assets acquired by Landlord after the Lease Date that are for the protection of health and safety of occupants of the Real Property or are reasonably intended to immediately or within one year reduce other Operating Expenses, such cost or allocable portion thereof to be amortized over the useful life thereof together with interest on the unamortized balance at the Amortization Rate; (18) the cost of furniture, window coverings, carpeting, decorations, landscaping and other customary and ordinary items of personal property provided by Landlord for use in common areas of the Real Property or in the Building office (to the extent that such Building office is dedicated to the operation and management of the Real Property), such costs to be amortized over the useful life thereof; (19) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord during the term of this Lease to the extent that the cost of any such improvement or asset is less than Five Thousand Dollars ($5,000); (20) property management office rent or rental value; (21) cost of operation, repair and maintenance of the adjacent below-grade parking garage, including resurfacing, restriping and cleaning; (22) any such expenses and costs resulting from substitution of work, labor, material or services in lieu of any of the above itemizations, or for any such additional work, labor, services or material resulting from compliance with any governmental laws, rules, regulations or orders applicable to the Real

 

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Property or any part thereof; and (23) Real Property Taxes. To the extent costs and expenses described above relate to both the Real Property and other property, such costs and expenses shall, in determining the amount of Operating Expenses, be allocated as commercially reasonable. Operating Expenses shall not include (A) legal fees, brokers’ commissions or other costs incurred in the negotiation, termination, or extension of leases or in proceedings involving a specific tenant; (B) depreciation; (C) capital expenditures (except for capital expenditures expressly included in the definition of Operating Expenses pursuant to Section 4.03A(16), 4.03A(17) and 4.03A(19)); (D) costs incurred in connection with the original construction of the Building or in connection with any major change in the Building, such as adding or deleting floors; (E) interest (except as expressly provided in Section 4.03A(16) and 4.03A(17)), principal, late charges, default fees, prepayment penalties or premiums on any debt owed by Landlord, including any mortgage debt; (F) costs of correcting defects in or inadequacy of the renovation of the Building; (G) expenses directly resulting from the defaults or gross negligence of the Landlord, its agents, servants or employees; (H) space planners’ fees, real estate brokers’ leasing commissions and advertising expenses incurred in connection with the original development or original leasing of the Building or future leasing of the Building; (I) costs for which Landlord is fully reimbursed by any tenant or occupant of the Building or by insurance by its carrier or any tenant’s carrier or by anyone else or costs incurred by Landlord for the repair of damage to the Real Property to the extent Landlord would have been reimbursed from insurance proceeds had Landlord carried the insurance which Landlord is expressly required to carry under the terms of this Lease, but which Landlord failed to carry ; (J) any bad debt loss, rent loss, or reserves for bad debts or rent loss; (K) costs associated with the operation of the business of the partnership or limited liability company which constitutes Landlord, as the same are distinguished from the costs of operation of the Building, including accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of Tenant may be the issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s interest in the Building, costs (including attorneys’ fees and costs of settlement, judgments and payments in lieu thereof) arising from claims, disputes or potential disputes in connection with potential or actual claims, litigation or arbitrations respecting Landlord and/or the Building and/or the Land; (L) the wages and benefits of any employee who does not devote substantially all of his or her time to the Building unless such wages and benefits are prorated as provided above to reflect time spent on

 

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maintaining, securing, repairing, operating or managing the Real Property vis-a-vis time spent on matters unrelated to such activities; (M) costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants in the Building or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building; (N) costs paid to Landlord or to affiliates of Landlord for services in the Building to the extent the same materially exceed or would materially exceed the costs for such services if rendered by first class unaffiliated third parties on a competitive basis; (O) costs arising from Landlord’s political or charitable contributions; (P) costs for sculpture, paintings or other objects of art; (Q) Landlord’s general corporate overhead; (R) costs of removal or remediation of Hazardous Substances (as defined in Section 5.05) required in order to comply with any laws applicable to the Building, including the Premises; (S) the cost of rental for items (except when needed in connection with normal repairs and maintenance or keeping permanent systems in operation while repairs are being made) which if purchased, rather than rented, would constitute a capital improvement which is specifically excluded from Operating Expenses; and (T) costs of electricity outside Business Hours provided to tenants of the Real Property by Landlord or any other special service to the tenants or service in excess of that furnished to Tenant whether or not Landlord receives reimbursement from such tenants as an additional charge.

 

B.            Tenant shall pay as additional rent an amount equal to the Operating Expenses paid or incurred by Landlord multiplied by Tenant’s Percentage. Before the Commencement Date and by January 31 of each succeeding calendar year, Landlord shall give Tenant notice of Landlord’s estimate of the payments to be made pursuant to this Section 4.03 for the then applicable calendar year. However, failure by Landlord to give such statement by said date shall not constitute a waiver by Landlord of its right to require payment of the additional rent. On or before the first day of each month, Tenant shall pay to Landlord one-twelfth (1/12) of such estimated amounts. Landlord may revise these estimates by written notice to Tenant whenever Landlord obtains more accurate information, such as the final real estate tax assessment or tax rate for the Real Property, in which event subsequent monthly payments by Tenant for such year shall be based upon such revised estimate. Within thirty (30) days after receiving Landlord’s notice regarding the revised estimate of the monthly payments to be made pursuant to Section 4.03 for a particular calendar year, Tenant shall pay Landlord an amount

 

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equal to the product of such estimated monthly payments (as set forth in Landlord’s notice), multiplied by the number of months that have elapsed in the applicable calendar year to the date of such payment including the current month, minus any payments on account thereof previously made by Tenant for the months elapsed. On the first day of each month thereafter, Tenant shall pay Landlord the estimated monthly payments as set forth in Landlord’s most recent notice, until a new estimate becomes applicable.

 

C.            On or before May 1 st  of each calendar year, Landlord shall deliver to Tenant a detailed statement of (a) Operating Expenses for such calendar year, and (b) the payments made by Tenant under Section 4.03 for such year (the “ Annual Expense Statement ”). Landlord shall also provide other reasonable supporting information that Tenant shall reasonably request. If, on the basis of such Annual Expense Statement, Tenant owes an amount that is less than the estimated payments for such calendar year previously made by Tenant, Landlord, at its election, shall either promptly refund the amount of the overpayment to Tenant or, if this Lease is still in effect, credit such excess and interest against Tenant’s subsequent obligations to pay Tenant’s Percentage of Operating Expenses. If, on the basis of such Annual Expense Statement, Tenant owes an amount that is more than the estimated payments for such year previously made by Tenant, Tenant shall pay the deficiency to Landlord within thirty (30) days after Landlord’s delivery of such Annual Expense Statement to Tenant. Even though the term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant’s Percentage of Operating Expenses for the year in which this Lease terminates, Tenant shall immediately pay additional rent due for the period of Tenant’s occupancy or Landlord shall immediately refund to Tenant any overpayment of additional rent paid for the period of Tenant’s occupancy.

 

D.            Landlord shall maintain books and records showing Operating Expenses in accordance with sound management practices and generally accepted accounting principles, consistently applied. Tenant or its representative (which shall in no event be a person or entity who is paid on a contingency basis) shall have the right, during the one hundred eighty (180) day period following delivery of the Annual Expense Statement to Tenant, to examine in Landlord’s offices or in the offices of Landlord’s property manager Landlord’s books and records with respect to the Operating Expenses and Real Property Taxes for the subject calendar year during normal business hours and upon at least five (5) business days’ prior written notice. No such

 

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examination by Tenant shall in any way delay or excuse Tenant’s obligation to pay any deficiency referenced in the Annual Expense Statement within the time period stated above in Section 4.03C. If Tenant does not object in writing to the Annual Expense Statement within fifteen (15) business days after such examination or at the end of such one hundred eighty (180) day period, whichever is later, then such Annual Expense Statement shall be deemed final and binding on Landlord and Tenant. If Tenant’s examination establishes that the Annual Expense Statement overstated the deficiency owed by Tenant by more than four percent (4%), then Landlord shall be responsible for the reasonable, out-of-pocket expenses paid by Tenant to third parties in connection with such examination. Except as provided in the preceding sentence, Tenant shall be responsible for all costs and expenses associated with such examination.

 

E.            If it shall not be lawful for Tenant to reimburse Landlord for any increase in Real Property Taxes as defined herein, the Base Rent payable to Landlord prior to the imposition of such increases in Real Property Taxes shall be increased to net Landlord the same net Base Rent after imposition of such increases in Real Property Taxes as would have been received by Landlord prior to the imposition of such increases in Real Property Taxes.

 

4.04        Payment . All rents and other sums payable by Tenant to Landlord hereunder shall be paid in legal U.S. tender in immediately available funds or by good check as described below to Landlord at the address designated by Landlord in Section 1.02 above, to such other person or at such other places as Landlord may hereafter designate in writing. Payments made by check must be drawn either on a California financial institution or on a financial institution that is a member of the federal reserve system. All amounts of Rent, if not paid when due, shall bear interest from the due date until paid at an annual rate of interest (the “ Interest Rate ”) equal to the lesser of (1) ten percent (10%) or (2) a rate equal to the sum of five (5) percentage points over the publicly announced reference rate (the “ Reference Rate ”) charged on such due date by the San Francisco Main Office of Bank of America, N.A. (or any successor bank thereto) (or if there is no such publicly announced rate, the rate quoted by such bank in pricing ninety (90) day commercial loans to substantial commercial borrowers). In addition, Tenant acknowledges that late payment by Tenant to Landlord of Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be

 

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imposed on Landlord by the terms of any encumbrance and/or note secured by an encumbrance covering the Premises. Therefore, if any installment of Rent due from Tenant is not received within ten (10) days after the date due, Tenant shall pay to Landlord an additional sum of four percent (4%) of the overdue Rent as a late charge; provided that, if Rent is not paid when due two (2) times during any period of twelve (12) calendar months and if Landlord shall have notified Tenant in writing that Tenant shall thereafter be entitled to no further grace periods, then during the remainder of such twelve (12) month period, Tenant shall not be entitled to such ten (10) day grace period, and such late charge shall be assessed on any Rent not paid by 5:00 p.m. on the due date. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment of Rent by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord. Notwithstanding the provisions of this Section 4.04 to the contrary, no late charge shall be assessed the first time during any calendar year that Rent is not paid within ten (10) days after the date on which it is due and payable, so long as Tenant shall pay any such delinquent amount within ten (10) days after notice of such delinquency from Landlord.

 

ARTICLE 5

USE

 

5.01        Use . Tenant shall use the Premises for the purposes specified in Section 1.08 and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord, which shall not be unreasonably withheld. Landlord acknowledges that Tenant’s contemplated use of the Premises is such that the Premises may be occupied weekday evenings and weekend days during the term in addition to customary business hours of 7:00 a.m. to 7:00 p.m. Accordingly, Tenant shall have access to the Premises at all times, subject to all other terms and provisions of this Lease. If Tenant’s use or operation of the Premises or any of Tenant’s equipment therein requires a governmental permit, license or other authorization or any notice to any governmental agency, Tenant shall promptly provide a copy thereof to Landlord.

 

5.02        Compliance with Laws . Tenant shall not use or occupy the Premises in violation of and Legal Requirement (as defined in Section 6.02) now or hereafter in effect or of the certificate of occupancy issued for the Building of which the Premises are a part, and shall

 

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immediately discontinue any use of the Premises which is declared by any governmental authority having jurisdiction to be a violation of such Legal Requirements or of such certificate of occupancy. Tenant, at its sole cost and expense, shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupation of the Premises; provided, however, Tenant shall not be required to make or pay for alterations or improvements to the structural portions of the Premises or Building, unless such alterations or improvements are necessitated by Tenant’s Work or alterations.

 

5.03        Nuisance and Waste . Tenant shall not do or permit anything to be done in or about the Premises or the Building which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises or the Building. Landlord acknowledges that Tenant’s use of the Premises as a lab shall not violate the terms of this Section 5.03. Nothing herein shall be construed to restrict or prohibit Tenant’s operation in accordance with its Intended Use. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. Tenant agrees not to cause, maintain or permit any nuisance in, on or about the Premises or the Building, or to use or permit to be used any loudspeaker or other device, system or apparatus that can be heard outside the Premises without the prior written consent of Landlord or to permit any objectionable odors, bright lights or electrical or radio interference that may annoy or interfere with the rights of other tenants of the Building or the public. The provisions of this Article 5 are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building.

 

5.04        Landlord’s Representation . Landlord represents and warrants to Tenant that Tenant’s use of the Premises for laboratory and vivarium purposes, so long as such uses constitute a Class B occupancy under the San Francisco Building Code, is not one which will invalidate Landlord’s insurance or cause an increase in the premium for such insurance or violates zoning and land use laws, rules, orders, ordinances, directions, regulations and requirements affecting the Real Property.

 

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5.05        Compliance with Environmental Laws and Other Environmental Matters .

 

A.            Tenant shall not bring or keep, or permit to be brought or kept, in the Premises or in or on the Real Property any Hazardous Substance (as hereinafter defined), except as expressly permitted by this Section 5.05A. Tenant shall not manufacture, generate, treat, handle, store or dispose of any Hazardous Substance in the Premises or in or on the Real Property, or use the Premises for any such purpose, or emit, release or discharge any Hazardous Substance into any air, soil, surface water or groundwater comprising the Premises or the Real Property, or permit any person using or occupying the Premises to do any of the foregoing, except as expressly permitted by this Section 5.05A. Notwithstanding the foregoing, Tenant may use, store, handle and dispose of any Hazardous Substances of the types and in amount customary in ordinary office use and the types of materials and substances exempt under the San Francisco Building Code in quantities permitted by the San Francisco Building Code for Group B occupancies for use in Tenant’s biotechnology research operations, provided all such usage, storage, handling and disposal is in compliance with all applicable Environmental Laws (as hereinafter defined). Tenant shall comply, and shall cause all persons using or occupying the Premises to comply, with all Environmental Laws applicable to the Premises, the use or occupancy of the Premises or any operation or activity therein and Tenant’s storage, use, handling and disposal of any Hazardous Substances used by Tenant in the Premises; provided, however, that Tenant shall not be required to contain, abate, remove or otherwise remediate any Hazardous Substance that was present in the Premises prior to delivery of the Premises to Tenant.. Tenant shall, within ten (10) days after Tenant’s receipt thereof, give written notice to Landlord of any notice or other communication (oral or written) regarding any (1) actual or alleged violation of Environmental Laws by Tenant or with respect to the Premises, (2) actual or threatened migration of any Hazardous Substance from the Premises, or (3) the existence of any Hazardous Substance in or on the Premises or regarding any actual or threatened investigation, inquiry, lawsuit, claim, citation, directive, summons, proceeding, complaint, notice, order, writ or injunction relating to any of the foregoing. As used in this Lease, “ Hazardous Substance ” shall mean any substance or material that is described as a toxic, hazardous, corrosive, ignitable, flammable or reactive substance, waste or material or a pollutant or contaminant, or words of similar import, in any of the Environmental Laws, and includes asbestos, petroleum, petroleum products, polychlorinated biphenyls, radon gas, radioactive matter, and chemicals that may cause

 

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cancer or reproductive toxicity. As used in this Lease, “ Environmental Laws ” shall mean all federal, state and local laws, ordinances, rules and regulations now or hereafter in force, as amended from time to time, in any way relating to or regulating human health or safety, or industrial hygiene or environmental conditions, or protection of the environment, or pollution or contamination of the air, soil, surface water or groundwater. Tenant shall indemnify and defend Landlord against and hold Landlord harmless from all claims, demands, liabilities, damages, fines, encumbrances, liens, losses, costs and expenses, including reasonable attorneys’ fees and disbursements, and costs and expenses of investigation, arising from or related to the existence on or after the Possession Date of Hazardous Substances from the Premises as a result of contamination caused by Tenant or the existence on or after the Possession Date of a violation of Environmental Laws by Tenant with respect to the Premises, except to the extent caused by the gross negligence or willful misconduct of a Landlord Party (as defined in Section 7.04). To the extent Tenant has an indemnification obligation under this Section 5.05, Tenant shall, as and to the extent required by Environmental Laws, perform all remedial actions to remove any Hazardous Substances in or on the Premises or to remedy actual or threatened migration from the Premises of any Hazardous Substances or to remedy any actual or threatened violation of Environmental Laws. This Section 5.05 shall survive termination of this Lease.

 

B.            Prior to first bringing any Hazardous Substances onto the Premises, Tenant shall prepare, and submit to Landlord for its review and approval, a Hazardous Substance Management Plan (the “ HSMP ”), specifying how Tenant intends to use, store, handle and dispose of any Hazardous Substances used in connection with its business and identifying all governmental permits, licenses, notifications and other forms of authorization Tenant is required to obtain. The HSMP shall describe in particular any biohazardous substances that Tenant intends to use in its operations at the Premises and the special precautions Tenant intends to take to assure that other occupants of the Building or members of the public are not exposed to such substances.

 

C.            California law requires landlords to disclose to tenants the existence of certain Hazardous Substances. Accordingly, the existence of gasoline and other automotive fluids, asbestos containing materials, maintenance fluids, copying fluids and other office supplies and equipment, certain construction and finish materials, tobacco smoke, cosmetics and other

 

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personal items must be disclosed. Gasoline and other automotive fluids are found in the Parking Lot. Cleaning, lubricating and hydraulic fluids used in the operation and maintenance of the Building are found in the utility areas of the Building not generally accessible to Building occupants or the public. Many Building occupants use copy machines and printers with associated fluids and toners, and pens, markers, inks, and office equipment that may contain Hazardous Substances. Certain adhesives, paints and other construction materials and finishes used in portions of the Building may contain Hazardous Substances. Although smoking is prohibited in the public areas of the Building, these areas may from time to time be exposed to tobacco smoke. Building occupants and other persons entering the Building from time to time may use or carry prescription and non-prescription drugs, perfumes, cosmetics and other toiletries, and foods and beverages, some of which may contain Hazardous Substances.

 

D.            The provisions of this Section 5.05 are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building.

 

E.            Landlord represents and warrants that, to the best of its knowledge, upon the Possession Date, the Premises shall comply in all material respects with Environmental Laws. If any portion of the Premises is in violation of Environmental Laws as of the Possession Date, Landlord shall perform such remediation work or cause other potentially responsible parties to remediate as and to the extent required by Environmental Laws. Subject to Landlord’s right to contest an alleged violation as set forth below, Landlord shall commence remediation work within thirty (30) days (or sooner if required by Environmental Laws) after receipt of written notice from Tenant describing in reasonable detail the nature of the violation, and thereafter diligently pursue such remediation work to completion as soon as reasonably practicable. Notwithstanding the foregoing, Landlord shall have the right to contest any alleged violation in good faith, including, without limitation, the right to apply for and obtain a waiver or deferment of compliance, the right to assert any and all defenses allowed by Environmental Laws, and the right to appeal any decisions, judgments or rulings as may be permitted by Environmental Laws.

 

5.06        Underground Storage Tank. Notwithstanding anything in this Lease to the contrary, Tenant shall have the right, at Tenant’s sole cost and expense, but without payment of

 

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any additional rent under the Lease, to use the four thousand (4,000) gallon underground diesel storage tank originally installed under the Real Property by a prior tenant of the Building (the “ UST ”), the electrical generator originally installed on the roof of the Building by such prior tenant (the “ Generator ”) and related equipment, including, but not limited to, fuel lines, electrical lines and electrical power connections and meters to service the Premises (collectively referred to herein, including the UST and the Generator, as the “ UST and Generator Equipment ”) subject to, and in accordance with, the terms and conditions contained in this Section 5.06.

 

A.            Tenant shall deliver to Landlord copies of all permits and other governmental registrations and approvals required by any Legal Requirement now or hereafter in effect applicable to the maintenance, operation and removal of the UST and Generator Equipment, including, without limitation, applicable requirements of the San Francisco Fire Department, San Francisco Department of Public Health, and the Bay Area Air Quality Management District.

 

B.            Tenant shall provide to Landlord, and maintain in effect (i) until such time as the Tenant no longer uses the UST and the UST is closed in accordance with applicable Legal Requirements, an Underground Storage Tank Compliance Policy in the minimum amount of One Million Dollars ($1,000,000) and (ii) until such time as Tenant no longer uses the UST and Generator Equipment and the UST is closed in accordance with applicable Legal Requirements, a Pollution Legal Liability Policy in the minimum amount of Five Million Dollars ($5,000,000), each naming Landlord as a loss payee, and otherwise in compliance with Section 7.03 of the Lease.

 

C.            Tenant, at its expense, shall keep the UST and Generator Equipment in good condition and repair, and shall comply with all applicable Legal Requirements relating to the maintenance, operation, and closure of the UST and Generator Equipment, including, without limitation, requirements pertaining to leak detection, secondary containment, corrosion protection and integrity testing, general inspections, spill control and response, and inventory control. In the event of a release from the UST and Generator Equipment, Tenant shall be the responsible party for all purposes under applicable Legal Requirements, unless such release was

 

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caused prior to the Possession Date or is caused by the gross negligence or willful misconduct of any Landlord Party.

 

D.            Tenant shall respond to any release of Hazardous Substances from the UST and Generator Equipment immediately after Tenant becomes aware of such release, regardless of the amount of the release, and shall make all required governmental notifications in the event of a release. In the event of any release from the UST and Generator Equipment, Tenant shall notify Landlord in writing of such release within twenty-four (24) hours after Tenant becomes aware thereof.

 

E.            On or before September 1 of each year during the term of this Lease, and otherwise from time to time during the term of this Lease within thirty (30) days following Landlord’s request, Tenant shall certify in writing to Landlord (and, upon Landlord’s request, to the holders of any Superior Interests) that to Tenant’s knowledge (i) Tenant has complied with all applicable Legal Requirements and its obligations hereunder, including, without limitation, all maintenance and monitoring requirements, and (ii) neither the UST and Generator Equipment nor the substances contained therein have resulted in soil, water, or other contamination on, under, or adjacent to the Premises or the Building in violation of Environmental Laws (or, to the extent applicable, that any such contamination or threat has been fully remediated to the satisfaction of all applicable governmental entities having jurisdiction).

 

F.             Landlord and its representatives shall have the right, at any reasonable time and from time to time, to inspect the UST and Generator Equipment and related property and soil, and to conduct soil or water sampling, testing, monitoring, digging, drilling, and analyses and to review any permits, documents, materials, inventories, financial data, or notices or correspondence to or from private parties or governmental authorities in connection therewith (collectively, a “ UST/Generator Inspection ”). In the event Landlord in good faith believes there has been a release from the UST and Generator Equipment in violation of Environmental Laws, all reasonable, out-of-pocket costs and expenses incurred by Landlord in connection with any UST/Generator Inspection shall become due and payable by Tenant within thirty (30) days after presentation by Landlord of an invoice therefor. Tenant shall maintain copies of all permits and other documentation relating to the UST and Generator Equipment at the Premises.

 

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G.            Tenant shall not modify all or any portion of the UST and Generator Equipment in any manner, and shall not change the substance stored in the UST, without first obtaining (i) the prior written consent of Landlord, which consent may be withheld in Landlord’s sole and absolute discretion, and (ii) all governmental permits and approvals required for such modification.

 

H.            In the event any investigation or monitoring of site conditions or any clean-up, containment, restoration, removal or other remedial work (collectively, the “ Remedial Work ”) is required under any applicable Legal Requirements, as the result of the maintenance, operation or closure of the UST and Generator Equipment by Tenant, its assignees, subtenants, or their respective agents, servants, employees, representatives and contractors, then at Landlord’s option either Tenant shall perform or cause to be performed the Remedial Work in compliance with such Legal Requirements or Landlord may cause such Remedial Work to be performed, and Tenant shall reimburse Landlord for all reasonable, out-of-pocket expenses incurred by Landlord in connection therewith within thirty (30) days after demand therefor. All Remedial Work performed by Tenant shall be performed by one or more contractors, selected by Tenant and approved in advance in writing by Landlord, which approval shall not be unreasonably withheld, and under the supervision of a consulting engineer selected by Tenant and approved in advance in writing by Landlord, which approval shall not be unreasonably withheld. All costs and expenses of such Remedial Work shall be paid by Tenant, including, without limitation, the charges of such contractors(s), the consulting engineer, and Landlord’s reasonable attorneys’ fees and costs incurred in connection with monitoring or review of such Remedial Work. Nothing in this Section 5.06H shall affect any of Landlord’s rights (or Tenant’s obligations) pursuant to this Section 5.06 or elsewhere in this Lease.

 

I.             In the event Tenant fails or is not able, for any reason, to comply with the Legal Requirements or Tenant’s obligations under this Section 5.06, in whole or in part, or if Landlord reasonably believes that the UST and Generator Equipment or the substance contained in the UST or Generator has resulted in or threatens to cause soil, water, or other contamination in violation of Environmental Laws or poses a threat to health, safety, or the environment, Landlord shall have the right, but not the obligation, to take any one or more of the following actions:

 

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(1)           To act in place of Tenant (and Tenant hereby appoints Landlord as Tenant’s agent for such purposes) and to take such action as Landlord may deem necessary to ensure compliance or to mitigate, abate, or correct the contamination or other threat. All reasonable, out-of-pocket costs and expenses incurred by Landlord in connection with any such actions, including, without limit, consultant’s and legal fees, shall become due and payable by Tenant to Landlord within thirty (30) days after presentation of an invoice therefor; and/or

 

(2)           Pursue all additional remedies as Landlord may have under the Lease and at law and in equity.

 

J.             Tenant hereby authorizes Landlord to communicate, verbally or in writing, with any governmental authority on any matter relating to the installation, use, maintenance, testing, operation, removal, or closure of the UST and Generator Equipment, the substances contained in the UST or Generator, or Tenant’s operations in connection therewith; and Tenant shall immediately forward to Landlord copies of any and all notices, correspondence, warnings, guidance, or other written materials received from any governmental authority in connection with the UST and Generator Equipment, the substances contained in the UST and Generator Equipment, or Tenant’s operations in connection therewith.

 

K.            Tenant hereby agrees to protect, defend, indemnify and hold Landlord Parties (defined below) and the holders of any Superior Interest (collectively, “Indemnitees”), and each of them, harmless from and against any and all claims, demands, suits, liabilities, losses, damages, penalties, response costs and expenses (including all consulting fees, litigation costs, and the reasonable fees and expenses of counsel) arising from or connected in any way with the UST and Generator Equipment, the substances contained in the UST and Generator Equipment, or the operations of Tenant or any employee, agent or contractor of Tenant in connection therewith, or a breach of any representation, warranty, covenant, or condition of this Section 5.06, including, without limitation, (i) the costs of any required or necessary repair, cleanup, or detoxification, and the preparation of any closure or other required plans, (ii) any violation of Legal Requirements, (iii) any lawsuit brought or threatened, settlement reached by Tenant, or government order, (iv) any personal injuries or property damages, and (vi) any migration of Hazardous Substances from the UST and Generator Equipment to adjacent

 

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properties. The foregoing indemnification by Tenant shall not apply to any claims, demands, suits, liabilities, losses, damages, penalties, response costs and expenses (including all consulting fees, litigation costs, and the reasonable fees and expenses of counsel) to the extent arising from the use of the UST and Generator Equipment prior to the Possession Date or to the extent caused by the gross negligence or willful misconduct of any Landlord Party.

 

L.            In the event the UST or the Generator is no longer desirable for Tenant’s use, and in any event prior to the expiration of the term of this Lease, Tenant shall close the UST and Generator Equipment in accordance with applicable Legal Requirements and to the reasonable satisfaction of Landlord, and restore the area in the vicinity of the UST and Generator Equipment to the condition existing as of the Possession Date. Additionally, Tenant shall provide Landlord with a copy of a certificate of closure issued for the UST and Generator Equipment by the City and County of San Francisco and/or other applicable governmental agency when such certificate of closure becomes available.

 

M.           Landlord shall permit Tenant, upon reasonable prior notice during normal business hours (except in an emergency), to have reasonable access to the UST and Generator Equipment and to and throughout the Building as reasonably necessary in order to fill the UST and Generator with fuel, monitor the fuel level therein, and maintain, repair and replace (when necessary) the UST and Generator Equipment. The indemnification provisions in Section 7.04 and the waiver of subrogation provisions in Section 7.03G shall apply to any damage claims relating to the UST and Generator Equipment.

 

N.            The parties acknowledge that the UST and Generator Equipment will be connected to the emergency generator for the Building (the “ Building Emergency Generator ”), and that the UST and Generator Equipment are designed to automatically refuel the Building Emergency Generator when a certain fuel level occurs. Landlord agrees that Tenant shall not be liable for any failure or malfunction of the UST and Generator Equipment to refuel the Building Emergency Generator as designed. Landlord shall be responsible for the maintenance, insurance, operation and repair of the Building Emergency Generator, the tank located on the roof of the Building providing the primary fuel source for the Building Emergency Generator, and the line from the UST (up to the T-valve) that connects the two systems and refuels the

 

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Building Emergency Generator. Tenant shall coordinate with Landlord any closure by Tenant of the UST and Generator Equipment pursuant to Section 5.06L above, so as to ensure that the Building Emergency Generator shall remain functional throughout the closure process and shall not be damaged as a result of such closure. Landlord shall promptly reimburse Tenant for the cost of any fuel from the UST used to refuel the Building Emergency Generator.

 

O.            Landlord makes no representations or warranties regarding the capacity, performance standards, or any other matter whatsoever regarding the UST and Generator Equipment or the Building Emergency Generator. In no event shall Landlord be liable for any damages directly or indirectly resulting from any malfunction or failure of the UST and Generator Equipment or the Building Emergency Generator, including, without limitation, loss of profits or injury or inconvenience or interference with Tenant’s business, and Tenant hereby waives all such claims against Landlord.

 

P.             Tenant acknowledges that the provisions of this Section 5.06 shall survive the expiration or sooner termination of this Lease, and may be enforced by Landlord as well as any successor-in-interest of Landlord.

 

ARTICLE 6

CONDITION OF PREMISES

 

6.01        Initial . Except as hereafter provided, by taking possession of the Premises, Tenant shall be conclusively presumed to acknowledge that the Premises, the Building and the Landlord’s Work were at such time in satisfactory condition; however, such presumption shall not apply as to latent defects in the Premises, Building or the Landlord’s Work that were not ascertainable in a customary walk-through inspection. Landlord represents and warrants that the Premises and Building have been, or will hereafter be, completed in a good and workmanlike manner, in full compliance with all applicable laws, rules, orders, ordinances, directions, regulations and requirements of all governmental agencies, offices, departments, bureaus and boards having jurisdiction, and in full compliance with the rules, orders, directions, regulations and requirements of the Pacific Fire Rating Bureau, or of any similar body, to the extent any of the foregoing were in effect on the Lease Date. Landlord represents and warrants that, to the best of its knowledge, upon the Possession Date the building systems, including, without

 

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limitation, plumbing and electrical lines and equipment, heating, ventilation and air conditioning systems, boilers, and elevators, and the fume hoods will be in good mechanical and operating condition. If it is determined that the foregoing representation was untrue as of the Possession Date, Landlord shall not be liable to Tenant for any damages, but Landlord, at no cost to Tenant, shall, as Tenant’s sole remedy, perform such work as may be necessary to cause such systems and equipment to be in good mechanical and operating condition. Landlord shall commence corrective work within thirty (30) days after receipt of written notice from Tenant describing in reasonable detail the nature of the deficiency or defect, and thereafter diligently pursue such corrective work to completion as soon as reasonably practicable.

 

6.02        Alterations .

 

A.            Tenant may make alterations or improvements to the interior of the Premises, without the approval of Landlord , without Landlord’s prior written consent so long as: (i) such alterations do not affect or require work to be performed on the structural portions of the Building or the life-safety, electrical, plumbing, heating, ventilation, air-conditioning, fire-protection, telecommunications or other building systems, (ii) such alterations are not visible from the exterior of the Premises, (iii) Tenant obtains the issuance of a building or other governmental permit, authorization or approval to the extent required for such alterations, and (iv) the cost of such alterations does not exceed Fifty Thousand Dollars ($50,000.00) per project. The foregoing alterations shall be hereinafter referred to as the “ Minor Alterations ”. Tenant shall provide Landlord at least twenty (20) days’ written notice prior to commencing such Minor Alterations. Any alterations or improvements other than Minor Alterations that Tenant desires to make to the Premises shall require Landlord’s prior written consent, which consent shall not be unreasonably withheld. In no event shall Tenant be permitted to make alterations or repairs outside of the Premises. Landlord shall respond to Tenant’s request for consent to the proposed alterations within ten (10) days after Landlord receives the request. If Landlord fails to respond within such ten (10) day period, Tenant may send a second request to Landlord. If no response is forthcoming from Landlord within five (5) days after Landlord’s receipt of the second notice, Landlord shall be deemed to have approved the proposed alterations. Any disapproval by Landlord shall include all specific reasons for such disapproval. Tenant shall, at its expense, cause all alterations to comply with all laws, statutes, ordinances, codes, rules, regulations,

 

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directives, requirements, orders, judgments, decrees or permits of any governmental authority or fire insurance underwriter or rating bureau, including the Americans with Disabilities Act of 1990 (“ ADA ”), Title 24 of the California Code of Regulations, and all building code, energy conservation, environmental, seismic, handicap, fire, health and safety laws (including laws relating to the handling and disposal of asbestos-containing materials) and regulations applicable to the Building (collectively “ Legal Requirements ”), provided that if on the Possession Date, the Premises do not comply with current Legal Requirements applicable to the Real Property (including, without limitation, the ADA), any design or construction costs incurred by Tenant that would not have been incurred had the Premises complied with all Legal Requirements in effect as of the Possession Date shall be reimbursed by Landlord to Tenant within twenty (20) days after receipt by Landlord from Tenant of an invoice documenting such costs. In addition, if in the course of performing any alterations, the Premises are determined to contain Hazardous Substances, Tenant shall have the right, by notice to Landlord, to require Landlord to remove, at Landlord’s expense, all such Hazardous Substances within thirty (30) days following receipt of such notice

 

B.            Any such alterations and improvements made by Tenant, including without limitation any partitions (movable or otherwise) or carpeting, shall become a part of the Building and belong to Landlord; provided, however, that equipment, trade fixtures and movable furniture shall remain the property of Tenant. Tenant shall use a general contractor, subcontractors, engineers and architects that are on Landlord’s approved list of design and construction professionals or those listed in Section 4.1(a) of the Work Letter. All alterations and improvements other than Minor Alterations shall be made in accordance with plans and specifications approved in writing by Landlord and shall be designed and constructed in compliance with all applicable Legal Requirements. The design and construction of any alterations or improvements shall be performed in accordance with Landlord’s construction rules, regulations and requirements, attached hereto as Exhibit E . Under no circumstances shall Landlord be liable to Tenant for any damage, loss, cost or expense incurred by Tenant on account of Tenant’s plans and specifications, Tenant’s contractors or subcontractors, or design of any work. Except to the extent of Landlord’s gross negligence or willful misconduct, Landlord shall not be liable to Tenant for any damage, loss, cost or expense incurred by Tenant on account of the construction of any work or delay in completion of any work.. Upon the expiration or

 

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sooner termination of this Lease, Tenant, at its expense, shall promptly remove any such alterations and improvements shall promptly remove any alterations or improvements which affect the structural portions of the Building or the building systems made by Tenant if designated by Landlord so to be removed at the time Landlord consents to such alterations or improvements if consent is required (otherwise if designated by Landlord at the expiration or termination of the Lease), and repair any damage to the Premises caused by such removal. Tenant shall use a general contractor reasonably acceptable to Landlord for such removal and repair.

 

C.            Tenant agrees to keep the Premises and the Real Property free from any liens arising out of any work performed, materials furnished or obligations incurred by Tenant. Tenant shall promptly and fully pay and discharge all claims on which any such lien could be based. In the event that Tenant does not, within fifteen (15) days following Tenant’s receipt of written notice from Landlord or Tenant’s obtaining actual knowledge of such lien, cause the same to be released of record or bonded against, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expenses incurred by it in connection therewith, shall be payable to Landlord by Tenant, as additional rent, on demand, together with interest at the Interest Rate from the date such expenses are incurred by Landlord to the date of the payment thereof by Tenant to Landlord. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper for the protection of Landlord, the Premises, the Building, or the Real Property, from mechanic’s and materialmen’s and like liens. Tenant shall give Landlord at least ten (10) days’ prior written notice of the date of commencement of any construction on the Premises in order to permit the posting of such notices.

 

6.03        Maintenance and Repair .

 

A.            Tenant’s Obligations . Except as otherwise provided in this Lease, Tenant, at its expense, shall keep the Premises and all equipment (including the fume hoods and lab equipment), fixtures and improvements therein in first-class repair and appearance, normal and

 

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reasonable wear and tear excepted. Tenant shall also keep and maintain in good condition and repair the Existing Furniture; provided, however, that Tenant shall not be obligated to repair or replace any Existing Furniture required as a result of ordinary wear and tear. Tenant shall be responsible for the janitorial services to its Premises. Tenant agrees not to employ any person, entity or contractor for any work in the Premises whose presence may give rise to a labor or other disturbance in the Building, and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for such services or work. Tenant waives all rights under, and benefits of, subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law or ordinance now or hereafter in effect. Upon the expiration or sooner termination of this Lease, Tenant shall surrender to the Landlord the Premises and the Existing Furniture (including replacements thereof purchased with insurance proceeds as described in Section 7.03C) and, unless designated by Landlord to be removed in accordance with Section 6.02B above, all alterations and improvements to the Premises in the same condition as when received or first constructed, ordinary wear and tear and damage thereto by fire, the perils of the extended coverage endorsement, and earthquake excepted. Except as otherwise expressly set forth in this Lease, no representation or warranty, express or implied, is made with respect to (1) the condition of the Premises or the Building, (2) the fitness of the Premises for Tenant’s intended use, (3) the degree of sound transfer within the Building, (4) the absence of electrical or radio interference in the Premises or the Building, (5) the condition, capacity or performance of electrical or communications systems or facilities, or (6) the absence of objectionable odors, bright lights or other conditions that may affect Tenant’s use and enjoyment of the Premises or the Building.

 

B.            Landlord’s Obligations . Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, heating, ventilating, air-conditioning and electrical systems subject to inclusion of the costs thereof in Operating Expenses. If such maintenance and repairs are caused in part or in whole by the act, neglect, fault of or omission of any duty by Tenant, its agents, servants, employees or invitees, Tenant shall pay to Landlord, as additional rent, the reasonable cost of such maintenance and repairs. Landlord shall not be liable for any failure to make any such repairs or maintenance until Tenant gives written notice of the need therefor, which notice may be by phone in the event of an urgent repair need. Except as otherwise provided in Section 11.17, there shall be no abatement of rent and no liability of

 

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Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein.

 

6.4          Reserved.

 

6.5          Entry by Landlord .

 

A.            Landlord reserves and shall at reasonable times upon reasonable prior notice to Tenant (except in an emergency) have the right to enter the Premises to inspect the same, to supply services to be provided by Landlord to Tenant hereunder, to submit said Premises to prospective purchasers, mortgagees or tenants, to post notices of nonresponsibility, to alter, improve or repair the Premises or any other portion of the Building, all without being deemed guilty of any eviction of Tenant and without abatement of Rent, except as otherwise provided herein. Except in the case of emergency, Tenant may impose additional restrictions on Landlord with respect to Landlord’s right of entry as to that portion of the Premises in which the vivarium lab is located (such as times of access and manner of access dependent upon Tenant’s particular use of the lab at the time Landlord requests the right to enter under this Section 6.05). Landlord may, in order to carry out the purposes under this Section 6.05, erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, provided that the business of Tenant shall not be unreasonably interfered with. For emergencies, Landlord shall have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant’s vaults and safes, and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises. If such entry is in accordance with this Section 6.05A, then Tenant waives any claims for damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises and any other loss occasioned by such entry. No provision of this Lease shall be construed as obligating Landlord to perform any repairs, alterations or decorations except as otherwise expressly agreed herein to be performed by Landlord.

 

B.            Landlord shall also have the right at any time to change the arrangement or location of access of entrances or passageways, doors and doorways, and corridors, elevators,

 

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stairs, toilets or other public parts of the Building, and to change the name, number or designation by which the Building is commonly known, so long as such activity does not unreasonably interfere with Tenant’s use of and access to the Premises and common areas, and none of the foregoing shall be deemed an actual or constructive eviction of Tenant, nor shall it entitle Tenant to any reduction of Rent hereunder (except as otherwise provided in Section 11.17) or result in any liability of Landlord to Tenant. Landlord agrees to provide Tenant with reasonable notice of such activities affecting the Premises and the anticipated effect such activities may have on Tenant’s ability to conduct business during such activities. In the event that such activities unreasonably interfere with Tenant’s use of the Premises, Rent shall abate pursuant to Section 11.17.

 

6.06        Access; Control . Landlord shall have the right from time to time to adopt such policies, procedures and programs as it shall, in Landlord’s sole discretion, deem necessary or appropriate for the security of the Building, and Tenant shall cooperate with Landlord in the enforcement of, and shall comply with, the policies, procedures and programs adopted by Landlord insofar as the same pertain to Tenant, its agents, employees, contractors and invitees. In no event shall Landlord be liable for damages resulting from any error with regard to the admission or exclusion from the Building of any person. In the case of invasion, mob, riot, public demonstration or other circumstances rendering such action advisable in Landlord’s opinion, Landlord reserves the right to prevent access to the Building during the continuance of the same by such action as Landlord may deem appropriate, including closing doors. In the event of any picketing, public demonstration or other threat to the security of the Building that is attributable to Tenant, Tenant shall reimburse Landlord for any costs incurred by Landlord in connection with such picketing, demonstration or other threat in order to protect the security of the Building, and Tenant shall indemnify and hold Landlord harmless from and protect and defend Landlord against any and all claims, demands, suits, liability, damage or loss and against all costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, arising out of or relating to any such picketing, demonstration or other threat. Tenant agrees not to employ any person, entity or contractor for any work in the Premises (including moving Tenant’s equipment and furnishings in, out or around the Premises) whose presence may give rise to a labor or other disturbance in the Building and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for the work.

 

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ARTICLE 7

UTILITIES; TAXES; INSURANCE

 

7.01        Utilities .

 

A.            Provided that Tenant is not in Default hereunder, Landlord shall furnish to the Premises the following services: water, natural gas, electrical power and elevator service; heating and air conditioning suitable for the comfortable use and occupation of the Premises (assuming normal office use thereof) during the period from 7:00 a.m. to 7:00 p.m. on weekdays (“ Business Hours ”). The Building is equipped with submeters to measure the consumption of electricity upon the Premises. Tenant shall on a monthly basis, as additional rent, pay to Landlord the cost of all such electricity consumed at the Premises as indicated by the submeter. The cost of all other utilities shall be included as Operating Expenses, to the extent applicable and to the extent such services are defined in Operating Expenses. Tenant shall give reasonable notice in making any request for utilities required outside of Business Hours, and Landlord shall make commercially reasonable efforts to satisfy Tenant’s request and provide to Tenant, upon Tenant’s request, an estimate of the approximate cost of such requested utilities. Tenant agrees to pay, as additional rent, promptly after written notice thereof, the actual costs incurred by Landlord in connection with providing any additional utilities Landlord may provide pursuant to Tenant’s request. Landlord shall provide the detail used for the calculation of these costs to Tenant within ten (10) days after request by Tenant.

 

B.            Tenant shall not, without first obtaining the Landlord’s written consent thereto, which consent shall not be unreasonably withheld or delayed, install within the Premises any electrical machinery, appliances or equipment which is not typically installed in offices (excluding, by way of example rather than limitation, microwave ovens, refrigerators, photocopying equipment, and fax machines typically found in offices) which uses electrical current in excess of that which is standard for the Building. Landlord shall have the right from time to time, using sub-meters or other methods, to measure the consumption of electricity or other utilities upon the Premises. Tenant agrees to pay, as additional rent, promptly on demand any and all costs incurred by Landlord in connection with providing utilities in excess of that which is standard for the Building. Tenant agrees that at all times it will cooperate fully with Landlord and abide by all regulations and requirements that Landlord may prescribe for the

 

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proper functioning and protection of the Building heating, ventilating and air conditioning systems. No such failure and no interruption of utilities or services from any cause whatsoever shall constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant, except as otherwise expressly provided in this Lease. Tenant hereby waives the provisions of California Civil Code Section 1932(1) or any other applicable existing or future law, ordinance or governmental regulation permitting the termination of this Lease due to such failure or interruption. Landlord shall not be liable for injury to or death of any person or damage to or destruction of property, however occurring, through or in connection with or incidental to the furnishing of or the failure to furnish any of the foregoing utilities or services or any other utilities or services except to the extent caused by Landlord’s gross negligence or willful misconduct.

 

C.            Landlord makes no representation to Tenant regarding the adequacy or fitness of the heating, air conditioning or ventilation equipment in the Building to maintain temperatures that may be required for, or because of, any of Tenant’s equipment that is not an ordinary office machine, and Landlord shall have no liability for loss or damage suffered by Tenant or others in connection therewith. If Tenant’s use of the heating, air conditioning or ventilation system causes damages to any of the air conditioning units or other equipment, the cost to repair or replace any such units or equipment due to such use shall be paid by Tenant to Landlord, as additional rent, upon demand by Landlord. If the temperature otherwise maintained in any portion of the Premises by the heating, air conditioning or ventilation system is affected as a result of (1) any lights, machines or equipment (including without limitation electronic data processing machines) used by Tenant in the Premises (other than a reasonable quantity of ordinary office machinery and lighting), (2) the occupancy of the Premises by more than one person per two hundred (200) square feet of rentable area therein, (3) an electrical load for lighting or power in excess of the limits per square foot of rentable area of the Premises specified in Section 7.01D below, or (4) any rearrangement of partitioning or other improvements, Landlord shall have the right to install supplementary air conditioning units or other equipment Landlord reasonably deems appropriate in the Premises, and the cost thereof, including the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord, as additional rent, within thirty (30) days after written demand by Landlord.

 

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D.            Tenant agrees it will not, without the written consent of Landlord, use any equipment, apparatus or device in the Premises (including, without limitation, electronic data processing machines, computers or machines using current in excess of 110 volts) that will, individually or in the aggregate, in any way cause the amount of electricity, water or heating, ventilation or air conditioning supplied to the Premises to exceed the amount usually furnished or supplied to premises being used as general office space, or connect with electric current (except through existing electrical outlets in the Premises) or with water pipes any equipment, apparatus or device for the purposes of using electric current or water. Landlord shall not, in any way, be liable or responsible to Tenant for any loss or damage or expense that Tenant may incur or sustain if, for any reasons beyond Landlord’s reasonable control, either the quantity or character of electric service is changed or is no longer available or suitable for Tenant’s requirements. Tenant covenants that at all times its use of electric current shall never exceed the capacity of the feeders, risers or electrical installations of the Building. If submetering of electricity in the Building will not be permitted under future laws or regulations, Base Rent will then be equitably adjusted to include an additional payment to Landlord reflecting the cost to Landlord for furnishing electricity to the Premises.

 

E.            In the event any governmental authority having jurisdiction over the Real Property or the Building promulgates or revises any law, ordinance or regulation or building, fire or other code or imposes mandatory or voluntary controls or guidelines on Landlord or the Real Property or the Building relating to the use or conservation of energy or utilities or the reduction of automobile or other emissions (collectively “ Controls ”) or in the event Landlord is required or elects to make alterations to the Real Property or the Building in order to comply with such mandatory or voluntary Controls, Landlord may, in its sole discretion, comply with such Controls or make such alterations to the Real Property or the Building related thereto. Such compliance and the making of such alterations shall not constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant; provided, however, that Landlord shall not agree to any voluntary Controls without first obtaining Tenant’s consent, which consent shall not be unreasonably withheld.

 

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7.02        Other Taxes Payable by Tenant . Tenant shall be liable for and shall pay before delinquency, taxes levied against any personal property, equipment, furniture or trade fixtures placed by Tenant in or about the Premises and on the cost or value of any leasehold improvements made in or to the Premises by or for Tenant. Tenant shall have the right, however, at Tenant’s sole cost and expense, if appropriate, and with Landlord’s full cooperation, to protest the payment of such taxes and to defer payment thereof until the protest has been finally resolved. Tenant also shall reimburse Landlord, within thirty (30) days after written request therefor, for any and all taxes payable by Landlord, whether or not now customary or within the contemplation of the parties hereto: (a) imposed upon or measured by the Base Rent payable hereunder, including, without limitation, any gross income tax or excise tax levied by the City and County of San Francisco, the State of California, the federal government or any other governmental body with respect to the receipt of such rental; (b) imposed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or (c) imposed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. In the event that it shall not be lawful for Tenant to so reimburse Landlord, the Base Rent payable to Landlord under this Lease shall be revised to net Landlord the same income after imposition of any such tax upon Landlord as would have been received by Landlord hereunder prior to the imposition of any such tax.

 

7.03        Insurance .

 

A.            Tenant shall during the entire term hereof, at its sole cost and expense, obtain, maintain and keep in full force and effect, for the protection of Tenant, Landlord and mortgagees of Landlord as their interest may appear, the following insurance or program of self insurance:

 

(1)           Property Insurance, “all risk” of direct physical loss (excluding earthquake/flood) including fire, extended coverage, vandalism and malicious mischief upon property of every description and kind owned by Tenant and located in the Building or for which Tenant is legally liable or installed by or on behalf of Tenant, including, without limitation, the

 

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Existing Furniture, furniture fittings, installations, fixtures and any other personal property, in an amount not less than 100% of the full replacement cost thereof; and

 

(2)           Commercial General Liability insurance (and commercial umbrella insurance, if necessary to provide required limits), to include personal injury, bodily injury, broad form property damage, operations hazard, contractual liability, products and completed operations with limits of not less than One Million Dollars ($1,000,000) per occurrence/Two Million Dollars ($2,000,000) general aggregate, plus a Five Million Dollar ($5,000,000) per occurrence/general aggregate umbrella.

 

B.            Not more often than once per year and upon at least sixty (60) days prior written notice, Landlord, in its reasonable discretion, may require Tenant to increase the insurance limits set forth in Section 7.03A(1) and (2) above. All policies shall be taken out with an insurer which is rated in “Best’s Insurance Guide” A:VI or better, except that insurance required to be carried by California Pacific Medical Center, as an affiliate of Sutter Health , may be through Sutter Health’s program of self-insurance with Sutter Insurance Services Corporation, a Hawaii corporation (“ SISCO ”), rather than an independent insurer. Sutter Health’s program of self-insurance shall be maintained as an actuarially sound and appropriately funded self-insurance program, with responsible retentions, sufficient excess coverage, and appropriately professional administration and otherwise in accordance with all applicable laws of the State of Hawaii. Tenant agrees that certificates of insurance on the insurer’s standard form shall be delivered to Landlord as soon as practicable after placing of the required insurance, but in no event later than ten (10) days prior to the date Tenant takes possession of all or any part of the Premises. All policies shall require the insurers to notify Landlord and the mortgagees of Landlord in writing not less than thirty (30) days prior to any material change, reduction in coverage, cancellation or other termination thereof. To the extent any of Tenant’s insurance coverage required hereunder is not covered by Sutter Health’s self-insurance program, the insurance policy shall name Landlord as a loss payee. Tenant shall be entitled to obtain insurance policies from SISCO so long as Tenant maintains a minimum Net Worth (as defined in Section 10.01F) equal to or greater than Fifty Million Dollars ($50,000,000) (the “ Net Worth Minimum ”). From time to time within twenty (20) business days after written request by Landlord, Tenant shall deliver to Landlord evidence reasonably satisfactory to Landlord of

 

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Tenant’s Net Worth. If Tenant’s Net Worth ceases to be equal to or greater than the Net Worth Minimum, Tenant’s right to maintain insurance issued by SISCO shall terminate until such time as Tenant’s Net Worth is equal to or greater than the Net Worth Minimum. In the event that Tenant elects to self-insure and an event or claim occurs for which a defense and/or coverage would have been available from a third-party insurer, Tenant shall undertake the defense of any such claim, including a defense of Landlord, at Tenant’s sole cost and expense, and use its own funds to pay any claim or replace any property or otherwise provide the funding that would have been available from insurance proceeds but for such election by Tenant to self-insure.

 

C.            In the event of damage to or destruction of the Building entitling Landlord to terminate this Lease pursuant to Article 8 hereof, if the Premises have also been damaged, and, if Landlord does elect to terminate this Lease, Tenant will immediately pay to Landlord all of its insurance proceeds relating to the Existing Furniture, Leasehold Improvements and alterations in the Premises. If the Premises have not been damaged, and Landlord terminates this Lease, Tenant will deliver to Landlord, in accordance with the provisions of this Lease, the Existing Furniture, the Leasehold Improvements, the alterations and the Premises. If Landlord does not elect to terminate the Lease as a result of damage to or destruction of the Building, Tenant will use any insurance proceeds relating to the Existing Furniture received by Tenant to replace the Existing Furniture that has been damaged or pay the proceeds over to Landlord if Tenant no longer needs the Existing Furniture that has been damaged. Upon the expiration or sooner termination of this Lease, Tenant shall surrender any Existing Furniture that has been replaced with insurance proceeds in accordance with Section 6.03A.

 

D.            Landlord covenants and agrees that throughout the term it will insure the Building (excluding any property with respect to which Tenant is obliged to insure pursuant to the provisions of Section 7.03A above) against damage by fire and standard extended coverage perils and public liability insurance in such reasonable amounts with such reasonable deductions as would be carried by a prudent owner of a similar building in the City where the Premises are located. Landlord may, but shall not be obliged to, take out and carry any other form or forms of insurance as it or the mortgagee of Landlord may reasonably determine advisable. Notwithstanding any contribution by Tenant to the cost of insurance premiums, as included in Operating Expenses, Tenant acknowledges that it has no right to receive any proceeds from any

 

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such insurance policies carried by Landlord. Landlord will not carry insurance of any kind on the Existing Furniture or Tenant’s furniture or furnishings or on any fixtures, equipment, improvements or appurtenances of Tenant under this Lease; and Landlord shall not be obligated to repair any damage thereto or replace the same.

 

E.            Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Premises any article which may be prohibited by any insurance policy in force from time to time covering the Building. If Tenant’s occupancy or conduct of business in or on the Premises, whether or not Landlord has consented to the same, results in any increase in premiums for the insurance carried from time to time by Landlord with respect to the Building, Tenant shall pay any such increase in premiums as additional rent within ten (10) days after being billed therefor by Landlord. In determining whether increase premiums are a result of Tenant’s use or occupancy of the Premises, a schedule issued by the organization computing the insurance rate in the Building or the Leasehold Improvements showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up such rate. Tenant shall promptly comply with all reasonable requirements of the insurance authority or of any insurer now or hereafter in effect relating to the Premises. Landlord represents that Tenant’s permitted use described in Section 1.08 hereof will not cause an increase in insurance rates.

 

F.             If any insurance policy carried by Landlord, as provided in Section 7.03D above, shall be cancelled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced, in any way by reason of the use or occupation of the Premises or any part thereof other than the intended use set forth above, by Tenant or by any assignee or subtenant of Tenant or by anyone permitted by Tenant to be upon the Premises and, if Tenant fails to remedy the condition giving rise to cancellation, threatened cancellation or reduction of coverage within forty-eight (48) hours after notice thereof, Landlord may enter upon the Premises and attempt to remedy such condition and Tenant shall forthwith pay the cost thereof to Landlord as additional rent. Landlord shall not be liable for any damage or injury caused to any property of Tenant or of others located in the Premises as a result of such entry. If Landlord shall be unable to remedy such condition, then Landlord shall have all of the remedies provided for in this Lease in the event of a Default by Tenant. Notwithstanding the foregoing provisions

 

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of this section, if Tenant fails to remedy as aforesaid, Tenant shall be in default of its obligation hereunder and Landlord shall have no obligation to attempt to remedy such default.

 

G.            Any policy or policies of fire, extended coverage or similar casualty insurance, which either party obtains in connection with the Premises, shall include a clause or endorsement denying the insurer any rights of subrogation against the other party to the extent rights have been waived by the insured prior to the occurrence of injury or loss. Landlord and Tenant waive any rights or recovery against the other for injury or loss due to hazard covered by insurance containing a waiver of subrogation clause or endorsement to the extent of the injury or loss covered thereby.

 

7.04        Indemnification .

 

A.            By Tenant . Tenant shall indemnify, protect, defend and hold harmless Landlord and Landlord’s agents, members, shareholders, constituent partners and/or other owners and Landlord’s contractors, officers, directors and employees (collectively with Landlord, the “ Landlord Parties ” and individually, a “ Landlord Party ”) and each of them against and from any and all claims, demands, suits, liability, damage, loss, cost and expenses (including reasonable attorneys’ fees, court costs and expenses): (1) arising out of Tenant’s use of the Premises or the conduct of its business at the Premises; (2) arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease; (3) arising out of any injury or death of any person or damage to or destruction of property occurring in the Premises, from any cause whatsoever, except to the extent caused by the gross negligence or willful misconduct of any Landlord Party; or (4) occurring in, on or about the Real Property to the extent such claim, injury or damage is caused by the gross negligence or willful misconduct of any Tenant Party. If any action or proceeding is brought against any of the Landlord Parties by reason of any such claim or liability, Tenant, upon notice from Landlord, covenants to resist and defend at Tenant’s sole expense such action or proceeding by counsel reasonably satisfactory to Landlord. The provisions of this Section 7.04A shall survive the termination of this Lease with respect to any claims or liability occurring prior to such termination.

 

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B.            By Landlord . Landlord shall indemnify, protect, defend and hold harmless Tenant and Tenant’s agents, members, shareholders, constituent partners and/or other owners’ and Tenant’s contractors, officers, directors and employees (collectively with Tenant, the “ Tenant Parties ” and individually, a “ Tenant Party ”)) and each of them against and from any and all claims, demands, suits, liability, damage, loss, cost and expenses (including reasonable attorneys’ fees, court costs and expenses): (1) occurring in, on or about the Real Property to the extent such claim, injury or damage is caused by the gross negligence or willful misconduct of any Landlord Party, (2) occurring in the common areas of the Building and arising from failure by Landlord to maintain such common areas as and to the extent required by this Lease; or (3) occurring in the Premises to the extent such claim, injury or damage is caused by the gross negligence or willful misconduct of any Landlord Party . If any action or proceeding is brought against any of the Tenant Parties by reason of any such claim or liability, Landlord, upon notice from Tenant, covenants to resist and defend at Landlord’s sole expense such action or proceeding by counsel reasonably satisfactory to Tenant. The provisions of this Section 7.04B shall survive the termination of this Lease with respect to any claims or liability occurring prior to such termination.

 

C.            Waiver . No Landlord Party shall be liable to Tenant, and Tenant waives all claims against all Landlord Parties, for any injury to or death of any person or for loss of use of or damage to or destruction of property in or about the Premises or the Building by or from any cause whatsoever, including without limitation, earthquake or earth movement, gas, fire, oil, electricity or leakage from the roof, walls, basement or other portion of the Premises or the Real Property, except to the extent such injury, death or damage is caused by the gross negligence or willful misconduct of any Landlord Party and not covered by the insurance required to be carried by Tenant hereunder or except to the extent such limitation on liability is prohibited by law.

 

ARTICLE 8

DAMAGE OR DESTRUCTION; TAKING

 

8.01        Insured Casualty . If the Building is damaged by fire or other perils covered by Landlord’s extended coverage insurance:

 

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A.            In the event of more than fifty percent (50%) destruction of the Premises (for purposes of this Article 8, a “total destruction”), Landlord shall have forty-five (45) days thereafter in which to elect, at Landlord’s sole option, to repair, reconstruct and restore the Premises, and, if Landlord elects to restore, Landlord shall have one hundred eighty (180) days (as extended by Force Majeure) from the date of destruction in which to complete the restoration, in which event this Lease shall remain in full force and effect. If Landlord elects to repair, reconstruct and restore the Premises, it will, with due diligence, use commercially reasonable efforts to locate a suitable temporary location for the Tenant, but Landlord’s inability to locate such temporary space shall impose no liability on Landlord. Any tenant improvements, moving costs and rental for the temporary space will be at the sole cost and expense of Tenant. If Landlord does not elect to restore the Premises, or, once having given notice of its election to restore does not diligently complete the restoration (subject to Force Majeure) within one hundred sixty (180) days from the date of destruction, then Tenant shall have the right to terminate this Lease upon twenty (20) days prior written notice, provided Landlord has not completed the restoration prior to the end of such twenty (20) day period.

 

B.            In the event of a destruction of the Premises that is less than a total destruction and if the damage thereto is such that the Premises may be repaired, reconstructed or restored within a period of one hundred eighty (180) days (as extended by Force Majeure) from the date of the casualty, Landlord shall repair, reconstruct or restore and this Lease shall continue in full force and effect. If (a) the damage cannot be repaired, reconstructed or restored within a period of one hundred eighty (180) days from the date of the casualty or (b) the casualty causing the damage is not required to be insured by Landlord and the estimated cost of repair, reconstruction or restoration exceeds Five Hundred Thousand Dollars ($500,000), Landlord shall have thirty (30) days after the casualty in which to elect to terminate the Lease.

 

C.            For purposes of estimating the period of time required for repair, reconstruction or restoration under this Section 8.01, the period being estimated shall commence upon the actual physical construction.

 

8.02        Release . Upon any termination of this Lease under any of the provisions of this Article 8, the parties shall be released thereby without further obligation to the other from the

 

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date possession of the Premises is surrendered to Landlord except for items which have theretofore accrued and are then unpaid. In those circumstances where Tenant has not been able to continue its then-existing use of the Premises due to the damage or destruction, and this Lease is terminated, possession will be deemed to have been surrendered as of the date of damage or destruction and any rent paid by Tenant thereafter shall be promptly refunded to it.

 

8.03        Abatement . In the event of repair, reconstruction and restoration by Landlord as the result of a casualty for which Landlord is obligated to insure hereunder, Rent to be paid under this Lease shall be abated proportionately with the degree to which Tenant’s use of the Premises is impaired during the period of such repair, reconstruction or restoration. Tenant shall not be entitled to any compensation or damage for loss in the use of the whole or any part of the Premises and/or inconvenience or annoyance occasioned by such damage, repair, reconstruction or restoration. Tenant shall not be released from any of its obligations under this Lease except to the extent and upon the conditions expressly stated in this Article 8.

 

8.04        Force Majeure . Notwithstanding anything to the contrary contained in this Article, should Landlord be delayed or prevented from repairing or restoring the damaged Premises within one year after the occurrence of such damage or destruction by reason of Force Majeure, Landlord or Tenant shall have the right to terminate this Lease as of the end of said one-year period.

 

8.05        Uninsured Casualty . If damage is due to any cause other than fire or other peril covered by Landlord’s extended coverage insurance, Landlord may elect to terminate this Lease, unless the repair cost is, under Landlord’s reasonable estimate, less than Five Hundred Thousand Dollars ($500,000), in which case Landlord shall proceed with repairs at its own expense.

 

8.06        Extent of Repair . It is hereby understood that if Landlord is obligated to or elects to repair or restore as herein provided, Landlord shall be obligated to make repairs or restoration only of those portions of the Building and the Premises which were originally provided at Landlord’s expense, and the repair and restoration of items not provided at Landlord’s expense shall be the obligation of Tenant.

 

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8.07        Waiver . The provisions of California Civil Code Section 1932, Subsection 2, Section 1933, Subsection 4, Section 1941 and Section 1942 are hereby waived by Tenant.

 

8.08        Eminent Domain .

 

A.            If all or part of the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, this Lease shall terminate as to any portion of the Premises so taken or conveyed on the date when title or the right to possession vests in the condemnor.

 

B.            If (1) a part of the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof; and (2) Tenant is reasonably able to continue the operation of Tenant’s business in that portion of the Premises remaining; and (3) Landlord elects to restore the Premises to an architectural whole, then this Lease shall remain in effect as to said portion of the Premises remaining, and the Base Rent payable from the date of the taking shall be reduced in the same proportion as the area of the Premises taken bears to the total area of the Premises. If, after a partial taking, Tenant is not reasonably able to continue the operation of its business in the Premises or Landlord elects not to restore the Premises as hereinabove described, then this Lease may be terminated by either Landlord or Tenant by giving written notice to the other party within thirty (30) days after the date of the taking. Such notice shall specify the date of termination, which termination date shall be not less than thirty (30) nor more than sixty (60) days after the date of said notice.

 

C.            If a portion of the Building is taken, whether any portion of the Premises is taken or not, and Landlord reasonably determines that it is not economically feasible to continue operating the portion of the Building remaining (which determination shall be made within thirty (30) days after such taking), then Landlord shall have the option for a period of thirty (30) days after such determination to terminate this Lease. If Landlord determines that it is economically feasible to continue operating the portion of the Building remaining after such taking, then this Lease shall remain in effect, with Landlord, at Landlord’s cost, restoring the Building to an architectural whole.

 

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D.            Except as provided in Section 8.08E, Landlord shall be entitled to any and all payment, income, rent, award, or any interest therein whatsoever that may be paid or made in connection with such taking or conveyance, and Tenant shall have no claim against Landlord or otherwise for the value of any unexpired term of this Lease or for the value of any improvements in or to the Premises. Tenant hereby assigns any such claim to the Landlord.

 

E.            Notwithstanding the provisions of Section 8.08D above, to the extent that the same shall not diminish Landlord’s recovery for such taking, Tenant shall be entitled to receive any award of compensation for the value of Tenant trade fixtures, the value of improvements paid for by Tenant, business interruption costs and any moving or relocation expenses which Tenant is entitled under applicable laws to recover directly from the public agency which acquires the Premises.

 

F.             Tenant hereby waives sections 1265.110 through 1265.160 of the California Code of Civil Procedure.

 

ARTICLE 9

DEFAULT AND REMEDIES

 

9.01        Events of Default . The occurrence of any one or more of the following events shall constitute a “ Default ” hereunder by Tenant:

 

A.            The abandonment of the Premises by Tenant.

 

B.            The failure by Tenant to make any payment of Rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of ten (10) days after written notice thereof from Landlord to Tenant (provided, however, that after the second such failure in a calendar year, only the passage of time, but no further notice, shall be required to establish a Default in the same calendar year); any such notice shall be in addition to any notice required under California Code of Civil Procedure Section 1161.

 

C.            The failure by Tenant to observe or perform any of the express or implied covenants or provisions of this Lease to be observed or performed by Tenant, other than as specified in subsection A or B above, as and when such observance or performance is due and

 

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where such failure shall continue for a period of 30 days after written notice thereof from Landlord to Tenant; any such notice shall be in addition to any notice required under California Code of Civil Procedure Section 1161; provided, however, that if the nature of Tenant’s default is such that more than 30 days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant shall commence such cure within such 30-day period and thereafter diligently prosecute such cure to completion within a reasonable time.

 

D.            (1) The making by Tenant of any general assignment for the benefit of creditors; (2) the filing by or against Tenant of, or Tenant’s consent by answer to, a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, insolvency or other debtors’ relief law (unless, in the case of a petition filed against Tenant to which Tenant does not consent, the same is dismissed within thirty (30) days); (3) the appointment of a trustee or receiver to take possession of a substantial part of Tenant’s assets, where possession is not restored to Tenant within thirty (30) days; (4) the attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease where such seizure is not discharged within 30 days; (5) the consent by Tenant to the appointment of a custodian, receiver, trustee or other officer with similar powers of Tenant or of any substantial part of Tenant’s property; or (6) without consent by Tenant, a court or government authority enters an order, and such order is not vacated within sixty (60) days, (a) constituting an order for relief or approving a petition for relief or reorganization or arrangement or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy, insolvency or other debtors’ relief law of any jurisdiction, or (b) ordering the dissolution, winding-up or liquidation of Tenant.

 

9.02        Termination . In the event of any Default by Tenant, in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder. In the event that Landlord shall elect to so terminate this Lease, then Landlord may recover from Tenant:

 

A.            The worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus

 

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B.            The worth at the time of award of the amount by which all unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

 

C.            The worth at the time of award of the amount by which all unpaid rent for the balance of the term of this Lease after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and

 

D.            Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligation under this Lease or which in the ordinary course of things would be likely to result therefrom.

 

As used in subsections 9.02.A and B above, the “worth at the time of award” is computed at the Interest Rate. As used in subsection C above, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%.

 

9.03        Continuation . In the event of any Default by Tenant, Landlord shall also have the right to continue this Lease in full force and effect, and this Lease shall continue in effect as long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have all of its rights and remedies, including the right, pursuant to California Civil Code Section 1951.4, to recover all Rent as it becomes due under this Lease. During the period Tenant is in Default, Landlord can enter the Premises and relet them, or any part of them, to third parties for its own account or for the Tenant’s account. Tenant hereby appoints Landlord its special attorney-in-fact for purposes of reletting for Tenant’s account. Tenant shall be liable immediately to Landlord for all costs Landlord incurs in reletting the Premises, including, without limitation, brokers’ commissions, expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be for a period shorter or longer than the remaining term of this Lease. Tenant shall pay the Landlord the rent due under this Lease on the dates the rent is due, less the rent Landlord receives from any reletting. No act by Landlord allowed by this Article shall terminate this Lease unless Landlord notifies Tenant that Landlord elects to terminate this Lease.

 

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9.04        Entry . In the event of any Default by Tenant, Landlord shall also have the right, without or without terminating this Lease, to reenter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. No reentry or taking possession of the Premises by Landlord pursuant to this subsection shall be construed as an election to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction.

 

9.05        Landlord’s Right to Perform . All terms and covenants of this Lease to be performed or observed by Tenant shall be performed or observed by Tenant at Tenant’s expense and without reduction of Rent, except as expressly provided herein to the contrary. If Tenant fails to perform any term or covenant hereunder on its part to be performed, such failure continues after any applicable notice and cure periods, Landlord, without waiving or releasing Tenant from any obligation of Tenant hereunder, may perform any such term or covenant on Tenant’s part to be performed but shall not be obligated to do so. All reasonable and necessary out-of-pocket costs of such performance by Landlord, together with interest thereon at the Interest Rate from the date of such payment or performance by Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord on demand by Landlord, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of non-payment thereof by Tenant as in the case of failure by Tenant in the payment of Rent hereunder.

 

9.06        Rights Cumulative . All rights, options and remedies of Landlord contained in this Lease shall be construed and held to be cumulative, and no one of them shall be exclusive of the other, and Landlord shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by law or in equity, by statute or otherwise, whether or not stated in this Lease. No waiver of any Default of Tenant hereunder shall be implied from any acceptance by Landlord of any rent or other payments due hereunder or any omission by Landlord to take any action on account of such Default if such Default persists or is repeated, and no express waiver shall affect Defaults other than as specified in such waiver. The consent or approval of Landlord to or of any act by Tenant requiring Landlord’s consent or approval shall

 

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not be deemed to waive or render unnecessary Landlord’s consent or approval to or of any subsequent or similar acts by Tenant.

 

ARTICLE 10

SUCCESSORS

 

10.01      Assignment and Subletting .

 

A.            Except in the event of a Transfer pursuant to Section 10.01F, Tenant shall not, either voluntarily or by operation of law, (1) assign or transfer this Lease or any interest herein, (2) sublet the Premises, or any part thereof, or (3) enter into a license agreement or other arrangement whereby the Premises, or any portion thereof, are held or utilized by another party (each of the foregoing defined herein as a “ Transfer ”), without the express prior written consent of Landlord, which consent Landlord shall not unreasonably withhold, condition or delay. Any such act (whether voluntary or involuntary, by operation of law or otherwise) without the consent of Landlord pursuant to the provisions of this Section 10.01 shall, at Landlord’s option, be void and/or constitute a Default under this Lease. Consent to any Transfer shall neither relieve Tenant of the necessity of obtaining Landlord’s consent to any future Transfer nor relieve Tenant from any liability under this Lease.

 

By way of example and without limitation, the failure to satisfy any of the following conditions or standards shall be deemed to constitute reasonable grounds for Landlord to refuse to grant its consent to the proposed Transfer:

 

(1)           The proposed Transferee must expressly assume all of the provisions, covenants and conditions of this Lease on the part of Tenant to be kept and performed.

 

(2)           The proposed Transferee must satisfy Landlord’s then-current credit and other standards for tenants of the Building and, in Landlord’s reasonable opinion, have the financial strength and stability to perform all of the obligations of the Tenant under this Lease (as they apply to the transferred space) as and when they fall due.

 

(3)           The proposed use of the Premises by the proposed Transferee must be, in Landlord’s opinion: (a) lawful; (b) appropriate to the location and configuration of the

 

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Premises; (c) a use not requiring any new tenant improvements that Landlord would be entitled to disapprove pursuant to Section 6.02; (d) unlikely to cause an increase in insurance premiums for insurance policies applicable to the Building; (d) unlikely to cause any material increase in services to be provided to the Premises; and (e) unlikely to create any materially increased burden in the operation of the Building, or in the operation of any of its facilities or equipment.

 

(4)           The proposed use of the Premises must not result in the division of the Premises into more than three (3) spaces.

 

(5)           At the time of the proposed Transfer, a Default shall not have occurred and be continuing.

 

(6)           The proposed Transferee shall not be a governmental entity or hold any exemption from the payment of ad valorem or other taxes that would prohibit Landlord from collecting from such Transferee any amounts otherwise payable under this Lease.

 

B.            Except in the event of a proposed Transfer pursuant to Section 10.01F below, Landlord shall have no obligation to consent or consider granting its consent to any proposed Transfer unless Tenant has first delivered to Landlord a written offer to enter into such Transfer with Landlord, which offer shall include the base rent and other economic terms of the proposed Transfer, the date upon which Tenant desires to effect such Transfer and all of the other material terms of the proposed Transfer (“ Tenant’s Offer ”). Landlord shall have ten (10) days from receipt of Tenant’s Offer within which to notify Tenant in writing of Landlord’s decision to accept or reject such Transfer on the terms set forth in Tenant’s Offer. If Landlord does not accept Tenant’s Offer within such period, Tenant shall deliver to Landlord a second notice of such offer. If Landlord does not accept Tenant’s offer within five (5) days after receipt of such second notice, Tenant may enter into such Transfer with any bona fide independent third-party Transferee (as defined in Section 10.01D below) within one hundred eighty (180) days after the end of such fifteen (15) day period, so long as such Transfer is for base rent not more than ten percent (10%) offered to Landlord in Tenant’s Offer and such Transfer otherwise contains terms not more than ten percent (10%) more favorable economically to the Transferee than the terms stated in Tenant’s Offer, taking into account all rent concessions, tenant improvements, and any other terms that have an economic impact on the Transfer; provided,

 

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however, that the prior written approval of Landlord for such Transfer must be obtained, and the other provisions of this Section 10.01 must be complied with, all in accordance with this Section 10.01. If Landlord accepts Tenant’s Offer, Landlord and Tenant shall enter into an agreement for such Transfer within twenty (20) days after the date Landlord makes its election. If Landlord accepts Tenant’s Offer, then (1) Landlord may enter into a new lease, sublease or other agreement covering the Premises or any portion thereof with the intended Transferee on such terms as Landlord and such Transferee may agree, or enter into a new lease or agreement covering the Premises or any portion thereof with any other person or entity, and in any such event, Tenant shall not be entitled to any portion of the profit, if any, that Landlord may realize on account of such new lease or agreement, (2) Landlord may, at Landlord’s sole cost, construct improvements in the subject space and, so long as the improvements are suitable for general office purposes, , and (3) Landlord shall not have any liability for any real estate brokerage commission(s) or with respect to any of the costs and expenses that Tenant may have incurred in connection with its proposed Transfer, and Tenant agrees to indemnify, defend and hold harmless Landlord from and against any and all claims (including, without limitation, claims for commissions) arising from such proposed Transfer.

 

C.            Except in the event of a Transfer pursuant to Section 10.01F, in the case of a proposed assignment of this Lease or a sublease of substantially the entire Premises for substantially the balance of the term of this Lease, then, in addition to the foregoing rights of Landlord, Landlord shall have the right, by notice to Tenant within fifteen (15) days after receipt of Tenant’s Offer (as defined below) to terminate this Lease, which termination shall be effective as of the date on which the intended assignment or sublease would have been effective if Landlord had not exercised such termination right. If Landlord elects to terminate this Lease, then from and after the date of such termination, Landlord and Tenant each shall have no further obligation to the other under this Lease with respect to the Premises except for matters occurring or obligations arising hereunder prior to the date of such termination. Landlord’s foregoing right and option shall continue throughout the entire term of this Lease.

 

D.            Except in the event of a Transfer pursuant to Section 10.01F , Tenant shall, in each instance of a proposed Transfer, give written notice to Landlord at least thirty (30) days prior to the effective date of any proposed Transfer, specifying in such notice (1) the nature

 

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of the proposed Transfer, (2) the portion of the Premises to be transferred, (3) the intended use of the transferred Premises, (4) all economic terms of the proposed Transfer, (5) the effective date thereof, (6) the identity of the transferee under the proposed Transfer (the “ Transferee ”), (7) current financial statements of the Transferee, and (8) detailed documentation relating to the business experience of the Transferee (collectively, “ Tenant’s Notice ”). Tenant’s Offer and Tenant’s Notice may be delivered concurrently so that the fifteen day period for Landlord’s response under Section 10.01C runs concurrently with the thirty (30) day period for Landlord’s response under this Section 10.01D. Tenant also shall promptly furnish Landlord with any other information reasonably requested by Landlord relating to the proposed Transfer or the proposed Transferee. Within fifteen (15) days after receipt by Landlord of Tenant’s Notice and any additional information and data requested by Landlord, Landlord shall notify Tenant of Landlord’s determination to either (1) consent to the proposed Transfer, or (2) refuse to consent to such proposed Transfer.

 

E.            Except in the event of a Transfer pursuant to Section 10.01F, if Landlord consents to a Transfer, Tenant shall pay to Landlord fifty percent (50%) of Excess Rental derived from such Transfer. “ Excess Rental ” shall mean all rent or other consideration paid or payable by such Transferee to Tenant in consideration for any such Transfer; and all rents received by Tenant from Transferee in connection with the Transfer in excess of the Rent payable by Tenant under this Lease (on a monthly basis during the Term, and on a per rentable square foot basis, if less than all of the Premises is transferred), after deducting Permitted Transfer Costs. As used herein, “ Permitted Transfer Costs ” means the actual third-party, out-of-pocket costs incurred and paid by Tenant for (i) any leasing commissions in connection with the Transfer and reasonable legal fees and expenses of documenting the lease assignment or sublease, and (ii) any alterations to the Premises made by Tenant in connection with the Transfer. For purposes of calculating the Excess Rental when the Excess Rental is not paid to Tenant in a lump sum, all Permitted Transfer Costs shall be amortized on a straight-line basis, without interest, over the relevant term of the Transfer. The portion of the Excess Rental due Landlord hereunder shall be paid within ten (10) days after Tenant receives any Excess Rental from the Transferee.

 

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F.             Notwithstanding anything to the contrary in this Section 10.01, Tenant shall have the right, without the consent of Landlord, but with at least fifteen (15) days prior written notice to Landlord, to assign Tenant’s interest in the Lease, or sublease all or a portion of the Premises, to a Permitted Transferee (as defined below) provided that (i) there shall be no Default beyond applicable cure periods after notice to Tenant under this Lease at the time of the assignment or sublease; (ii) at least twenty (20) days prior to the effective date of such assignment or sublease, Tenant shall furnish Landlord with the name of the Permitted Transferee, the current financial statements of the Permitted Transferee, a written certification from an officer of Tenant certifying the manner in which the proposed assignee or subtenant is affiliated with Tenant and organizational documents of Transferee to the extent required to evidence that the Transferee is a Permitted Transferee; (iii) in the case of a Permitted Transferee into or with which Tenant will merge or consolidate and as a result of such merger or consolidation, Tenant is not the surviving entity, the Net Worth of the Permitted Transferee shall be substantially equal to or greater than the Net Worth of Tenant prior to the assignment, and proof reasonably satisfactory to Landlord of the Net Worth of the Permitted Transferee shall have been delivered to Landlord at least twenty (20) days prior to the effective date of the proposed assignment or sublease; (iv) at least three (3) business days prior to the effective date of the assignment, Tenant shall deliver to Landlord an executed assignment and assumption whereby the assignee assumes all of the obligations of Tenant under this Lease, in form and substance reasonably satisfactory to Landlord; and (v) the assignment or sublease under this Section 10.01F is made for a good faith operating business purpose and not as a subterfuge to evade the obligations and restrictions relating to transfers set forth in this Section 10.01. An assignment or sublease under this Section 10.01F shall not be subject to any provisions contained in this Section 10.01 except Sections 10.01F, 10.01G, 10.01H and 10.01J. For purposes of this Section 10.01F, the term “ Permitted Transferee ” shall mean any person, corporation or other entity which: (i) is a parent, wholly owned subsidiary or commonly controlled affiliate of Tenant; (ii) merges with Tenant; (iii) acquires control of Tenant; (iv) acquires all or substantially all of the assets of Tenant; or (v) results from any corporate reorganization, including a so-called spin-off, of Tenant. The term “control” shall mean ownership of more than fifty percent (50%) of all of the voting stock of a corporation or more than fifty percent (50%) of all of the legal and equitable interest in any other business entity. The term “substantially all of the assets of

 

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Tenant” shall mean at least eighty percent (80%) of Tenant’s assets. For purposes of this Section 10.01F, the term “ Net Worth ” shall mean the excess of total assets over total liabilities, determined in accordance with generally accepted accounting principles, excluding, however, from the determination of total assets, goodwill and other intangibles. In no event shall Landlord be entitled to recapture all or any portion of the Premises, nor shall Tenant be obligated to pay any Excess Rental to Landlord in connection with an assignment or sublease to a Permitted Transferee.

 

G.            Tenant agrees that any instrument by which Tenant assigns this Lease or any interest therein or sublets or otherwise Transfers all or any portion of the Premises shall expressly provide that the Transferee may not further assign this Lease or any interest therein or sublet the sublet space without Landlord’s prior written consent (which consent shall be subject to the provisions of this Section 10.01), and that the Transferee shall comply with all of the provisions of this Lease and that Landlord may enforce the Lease provisions directly against such Transferee. No permitted subletting by Tenant shall be effective until there has been delivered to Landlord a counterpart of the sublease in which the subtenant agrees to be and remain jointly and severally liable with Tenant for the payment of rent pertaining to the sublet space and for the performance of all of the terms and provisions of this Lease; provided, however, that the subtenant shall be liable to Landlord for rent only in the amount set forth in the sublease. Landlord may, upon a Default by Tenant hereunder, collect rent from the subtenant provided that Landlord applies the amount collected from the subtenant to Tenant’s monetary obligations hereunder. No permitted assignment shall be effective unless and until there has been delivered to Landlord a counterpart of the assignment in which the assignee assumes all of Tenant’s obligations under this Lease arising on or after the date of the assignment. The failure or refusal of a subtenant or assignee to execute any such instrument shall not release or discharge the subtenant or assignee from its liability as set forth above. Neither Landlord’s collection of rent from a Transferee nor any course of dealing between Landlord and any Transferee shall constitute or be deemed to constitute Landlord’s consent to any Transfer.

 

H.            Notwithstanding any provision of this Lease to the contrary, Tenant shall not mortgage, encumber or hypothecate this Lease or any interest herein without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole and absolute discretion.

 

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Any such act without the prior written consent of Landlord (whether voluntary or involuntary, by operation of law or otherwise) shall, at Landlord’s option, be void and/or constitute a Default under this Lease.

 

I.             Except in the event of a Transfer pursuant to Section 10.01F, if Landlord consents to a Transfer hereunder the renewal options in Section 3.03 shall not run to the Transferee, it being agreed by the parties hereto that any such rights and options are personal to the original Tenant named herein and may not be transferred.

 

J.             Tenant shall pay to Landlord the amount of Landlord’s reasonable, out-of pocket expenses to review and negotiate (if applicable) each proposed Transfer and the documentation related thereto (including, without limitation, attorneys’ and other professional fees).

 

K.            For any Transfer requiring Landlord’s consent, as a condition to its consent, Landlord shall have the right to require that the Transferee post a security deposit in an amount reasonably determined by Landlord and that this Lease be amended to incorporate customary provisions relating to the application, replenishment and return of such security deposit. Tenant acknowledges and agrees that such condition is reasonable and is imposed as a condition to Landlord’s agreement not to require the originally named Tenant or any Permitted Transferee to post a security deposit.

 

10.02      Successors and Assigns . Except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns.

 

10.03      Surrender of Premises . The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, operate as an assignment to it of any or all subleases or subtenancies.

 

10.04      Definition of Landlord . The term “ Landlord ” as used in this Lease, so far as covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner or owners, at the time in question, of the fee of the Premises. In the event

 

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of any transfer, assignment or other conveyance or transfers of any such title or leasehold, Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall be automatically freed and relieved from and after the date of such transfer, assignment or conveyance of all liability as respects the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed and, without further agreement, the transferee of such title shall be deemed to have assumed and agreed to observe and perform any and all obligations of Landlord hereunder, during its ownership of the Premises. Landlord may transfer its interest in the Premises without the consent of Tenant and such transfer or subsequent transfer shall not be deemed a violation on Landlord’s part of any of the terms and conditions of this Lease.

 

ARTICLE 11

MISCELLANEOUS

 

11.01      Brokers . The parties recognize that the brokers who negotiated this Lease are the brokers whose names are stated in Section 1.10, and agree that Landlord shall be solely responsible for the payment of brokerage commissions to Landlord’s Broker (who shall be responsible for paying Tenant’s Broker), and Tenant shall have no responsibility therefor. If Tenant has dealt with any other person or real estate broker in respect of leasing or rent space in the Building, Tenant shall be solely responsible for the payment of any fee due said person or firm and Tenant shall hold Landlord free and harmless against any liability in respect thereto.

 

11.02      Protection of Lenders .

 

A.            This Lease shall be subject and subordinate at all times to all ground or underlying leases that may now or hereafter exist affecting the Building or the Real Property, or both, and to the lien of any mortgage or deed of trust in any amount or amounts whatsoever now or hereafter placed on or against the Building or the Real Property, or both, or on or against Landlord’s interest or estate therein (such mortgages, deeds of trust and leases are referred to herein, collectively, as “ Superior Interests ”), all without the necessity of any further instrument executed or delivered by or on the part of Tenant for the purpose of effectuating such subordination provided that the holder of the Superior Interest agrees in writing in form reasonably acceptable to Tenant and the holder of the Superior Interest to the provisions of

 

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Section 11.02B. Within twenty (20) days after Landlord’s written request therefor, Tenant shall execute any and all documents reasonably required by any holder of the Superior Interest evidencing this Lease to be subordinate to the lien of any such leases, mortgage or deed of trust, as the case may be, provided that documents include the provisions of Section 11.02B.

 

B.            In the event of a foreclosure of any such mortgage or deed of trust or of any other action or proceeding for the enforcement thereof, or of any sale thereunder, this Lease shall not be terminated or extinguished, nor shall the rights and possession of Tenant hereunder be disturbed, if no Default then exists under this Lease, and Tenant shall attorn to the person who acquires Landlord’s interest hereunder through any such mortgage or deed of trust.

 

C.            If Landlord is in default, Tenant shall accept cure of any default by any mortgagee whose name and address shall have been furnished to Tenant in writing. Tenant may not exercise any rights or remedies for Landlord’s default unless Tenant gives notice thereof to each such mortgagee and the default is not cured within thirty (30) days thereafter or such greater time as may be reasonably necessary to cure such default. A default that cannot reasonably be cured within said 30-day period shall be deemed cured within said period if work necessary to cure the default is commenced within such thirty (30) day period, the cure is diligently prosecuted and the default is cured within a reasonable time thereafter.

 

D.            In the event of any default on the part of Landlord, Tenant will give notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Premises whose address shall have been furnished to Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, including time to obtain possession of the Premises by power of sale or a judicial foreclosure, if such should prove necessary to effect a cure upon terms and conditions customary for effecting such cure.

 

11.03      Estoppel Certificate; Financial Statements . Within fifteen (15) days following any written request which either Landlord or Tenant may make to the other from time to time, the requested party shall execute and deliver to the other a statement certifying: (a) the date of commencement of this Lease; (b) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications thereto, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications); (c) the date to which the rental

 

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and other sums payable under this Lease have been paid; (d) the fact that there are no current defaults under this Lease by either Landlord or Tenant, except as specified in such statement; and (e) such other matters reasonably requested by the requesting party. Landlord and Tenant intend that any statement delivered pursuant to this Section may be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or any interest therein, or of Tenant’s interest. In connection with any proposed sale, financing or refinancing of the Real Property, Tenant shall, within fifteen (15) days after written request from Landlord, provide to Landlord a copy of Tenant’s most recent annual audited financial statement or most recent annual report but such request of Tenant shall not be made by Landlord more often than once in any calendar year.

 

11.04      Rules and Regulations . Tenant shall faithfully observe and comply with the “Rules and Regulations,” a copy of which is attached hereto and marked Exhibit D , and all reasonable and nondiscriminatory modifications thereof and additions thereto from time to time put into effect by Landlord. Landlord shall diligently enforce all such Rules and Regulations, on a nondiscriminatory basis. In the event of any conflict between the Rules and Regulations and the express provisions of this Lease, the provisions of this Lease shall govern.

 

11.05      Conflict of Laws . This Lease shall be governed by and construed pursuant to the laws of the State of California.

 

11.06      Attorneys’ Fees . In the event either party commences legal proceedings to enforce any of the terms of this Lease, including any action in a bankruptcy case, the successful party shall be entitled to receive from the other party a reasonable sum as attorneys’ fees and costs, including all fees and costs incurred upon any appeals, to be fixed by the court in the same action. Any such attorneys’ fees and other expenses incurred by either party in enforcing a judgment in its favor under this Lease shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Lease and to survive and not be merged into any such judgment.

 

11.07      Reserved.

 

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11.08      Waiver . The waiver by either party of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such Rent.

 

11.09      Terms and Headings . The words “ Landlord ” and “ Tenant ” as used herein shall include the plural as well as the singular. Words used in any gender include other genders. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. The section headings of this Lease are not part of this Lease and shall have no effect upon the construction or interpretation of any part thereof.

 

11.10      Time . Time is of the essence with respect to the performance of every provision of this Lease.

 

11.11      Prior Agreements; Amendments . This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest.

 

11.12      Separability . Any provision of this Lease which shall prove to be invalid, void or illegal in no way affects, impairs or invalidates any other provision hereof, and such other provisions shall remain in full force and effect.

 

11.13      Force Majeure . The term “ Force Majeure ” as used herein shall mean any delay which is attributable to strike, lockout or other labor disturbance, riot, civil disturbance, inability to secure materials, supplies or labor through ordinary sources, fire, storm, lightening, earthquake, flood, explosion, the delay or failure to act of any governmental body, or any other cause beyond the reasonable control of the affected party.

 

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11.14      Signs and Auctions . Tenant shall not place any sign upon the Premises or the Building or conduct any auction thereon without Landlord’s prior written consent, which consent shall not be unreasonably withheld, and subject to obtaining all applicable governmental approvals. Landlord agrees to list Tenant’s name on the directory board in the lobby of the Building, and on the Building standard signage in the elevator lobby, at Landlord’s cost and expense; provided, however, any change to the initial listing or any additional listings shall be at Tenant’s cost and expense. Landlord’s acceptance of any name for listing on the directory board, the standard signage or any exterior sign shall in no event be, or be deemed to be, nor will it substitute for, Landlord’s consent, as required by this Lease, to any sublease, assignment, or other occupancy of the Premises.

 

11.15      Accord and Satisfaction . No payment by Tenant or receipt by Landlord of a lesser amount than the rent payment herein stipulated shall be deemed to be other than on account of the rent, nor shall any endorsement or statement on any check or any letter accompanying any check, or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy provided in this Lease.

 

11.16      Quiet Enjoyment . Landlord covenants and agrees that, absent a Default by Tenant, Tenant shall have quiet and peaceful possession of the Premises and shall enjoy all of the rights herein granted without interference.

 

11.17      Adverse Condition . If at any time during the Term, Tenant, in Tenant’s reasonable judgment, is unable to, and actually does not, use all or a material portion of the Premises, or Tenant is able to conduct its operations in all or any portion of the Premises only at a significantly reduced level or under materially adverse conditions (“ Adverse Condition ”) as a result of: (a) Landlord’s breach of its repair and maintenance obligations under Section 6.03B or Landlord’s interference with Tenant’s business arising from the making of any repairs, alterations or improvements that rises to the level of an Adverse Condition; (b) Landlord’s breach of its obligation not to unreasonably interfere with Tenant’s use of or access to the Premises and common area under Section 6.05B; or (c) Landlord’s failure to provide the services Landlord is obligated to provide under Section 7.01 A for a period of three (3) consecutive

 

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business days (“ Adverse Condition Period ”), then Tenant may elect, by notice to Landlord, to have Rent abate proportionally as provided below, provided that with respect to the Adverse Condition in question, Tenant shall have given notice to Landlord of the occurrence thereof, which notice shall designate the cause or suspected cause of the Adverse Condition, if known to Tenant, and the portion of the Premises which is not usable by Tenant or in which the Adverse Condition exists. Rent shall abate, in the proportion that the rentable area of the effected portion of the Premises bears to the rentable square foot area of the Premises, for the period during which the Adverse Condition continues provided that such period shall not commence to run until the day after Tenant gives Landlord notice of the Adverse Condition as required above. If an Adverse Condition continues for sixty (60) consecutive days, Tenant shall thereafter have the on-going right, until such Adverse Condition is eliminated, to terminate this Lease as to all or any portion of the Premises. The provisions of this Section 11.17 shall not apply to a casualty or an eminent domain taking, which shall be governed by Article 8.

 

11.18      Condition of Premises at Expiration . At the expiration of this Lease, Tenant shall surrender the Premises, including all leasehold improvements and alterations within the Premises, in broom clean condition, subject to normal wear and tear and damage by the elements or other event contemplated by Article 8 above. Tenant shall, prior to the expiration or earlier termination of this Lease, remove from the Premises all of Tenant’s personal property, furniture and telecommunications cabling or equipment installed by Tenant and shall have the right, but not the obligation, prior to the expiration or earlier termination of this Lease, to remove from the Premises any trade fixtures or signs installed by Tenant, provided that Tenant shall repair any damage caused by such removal. Any trade fixtures or signs not removed by Tenant prior to the expiration or earlier termination of this Lease shall be deemed the property of Landlord.

 

11.19      Notices . Any notice required or permitted to be given hereunder must be in writing and may be given by personal delivery or by mail, and if given by mail, shall be deemed sufficiently given if sent by registered or certified mail, postage prepaid, or by reputable courier service which provides written evidence of delivery addressed to Landlord or to Tenant at its address designated in Sections 1.02 and 1.03, respectively. Either party may, by written notice to the other, specify a different address for notice purposes. Notices shall be effective upon actual receipt or upon refusal to accept delivery or, if the notice cannot be delivered due to a change of

 

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address of the receiving party notice of which was not given to the sending party, on the date delivery was attempted.

 

11.20      Abandonment . Tenant shall not abandon the Premises or any part thereof at any time during the term hereof. Tenant understands that if Tenant abandons the Premises, the risk of fire, other casualty and vandalism to the Premises and the Building will be increased. Accordingly, such action by Tenant shall constitute an immediate Default hereunder regardless of whether Tenant continues to pay Base Rent and other Rent under this Lease. If Tenant abandons or surrenders the Premises or is dispossessed of the Premises by process of law, or otherwise, any movable furniture, equipment, trade fixtures, or other personal property belonging to Tenant and left on the Premises shall at the option of Landlord be deemed to be abandoned and Landlord shall have the right to remove such property from the Premises and charge Tenant for the removal and any restoration of the Premises. Landlord may charge Tenant for the storage of Tenant’s property left on the Premises at such rates as Landlord may from time to time reasonably determine, or, Landlord may, at its option, store Tenant’s property in a public warehouse at Tenant’s expense. Notwithstanding the foregoing, neither the provisions of this Section 11.20 nor any other provision of this Lease shall impose upon Landlord any obligation to care for or preserve any of Tenant’s property left upon the Premises, and Tenant hereby waives and releases Landlord from any claim or liability in connection with the removal of such property from the Premises and the storage thereof and specifically waives the provisions of California Civil Code Section 1542 with respect to such release. Landlord’s action or inaction with regard to the provisions of this Section 11.20 shall not be construed as a waiver of Landlord’s right to require Tenant to remove its property, restore any damage to the Building caused by such removal or make any restoration required pursuant to this Lease.

 

11.21      Landlord’s Liability . Any liability of Landlord (including without limitation Landlord’s members, partners, shareholders, affiliates, agents, and employees) to Tenant under this Lease shall be limited to the equity interest of Landlord in the Building, and Tenant agrees to look solely to such interest for the recovery of any judgment, it being intended that Landlord and such other persons shall not be personally liable for any deficiency or judgment. Notwithstanding any other provision of this Lease, Landlord shall not be liable for any consequential damages nor shall Landlord be liable for any loss of or damage to artwork,

 

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currency, jewelry, bullion, unique or valuable documents, securities or other valuables, or for other property not in the nature of ordinary fixtures, furnishings and equipment used in general administrative and executive office activities and functions. Wherever in this Lease Tenant (a) releases Landlord from any claim or liability, (b) waives or limits any right of Tenant to assert any claim against Landlord or to seek recourse against any property of Landlord or (c) agrees to indemnify Landlord against any matters, the relevant release, waiver, limitation or indemnity shall run in favor of and apply to Landlord, its agents, the constituent shareholders, partners or other owners of Landlord or its agents, and the directors, officers, and employees of Landlord and its agents and each such constituent shareholder, partner or other owner.

 

11.22      Waiver of Jury Trial . IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND TENANT TO ENFORCE THE PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR PROCEEDING BETWEEN LANDLORD AND THE TRUSTEE OR DEBTOR IN POSSESSION WHILE TENANT IS A DEBTOR IN A PROCEEDING UNDER ANY BANKRUPTCY LAW) PROCEEDS TO TRIAL, LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY IN SUCH TRIAL.

 

11.23      Diminution of Light, Air and View . Tenant agrees that no diminution or shutting off of light, air or view by any structure that may be erected (whether or not by Landlord) on property adjacent to the Building shall in any way affect this Lease, entitle Tenant to any reduction of Rent hereunder or result in any liability of Landlord to Tenant.

 

11.24      Authority . If Tenant is a corporation (or other business organization), Tenant and each person executing this Lease on behalf of Tenant represents and warrants to Landlord that (a) Tenant is duly incorporated (or organized) and validly existing under the laws of its state of incorporation (or organization), (b) Tenant is qualified to do business in California, (c) Tenant has full right, power and authority to enter into this Lease and to perform all of Tenant’s obligations hereunder, and (d) the execution, delivery and performance of this Lease has been duly authorized by Tenant and each person signing this Lease on behalf of the Tenant is duly and validly authorized to do so.

 

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11.25      Miscellaneous . The Exhibits referenced in Section 1.11 are a part of this Lease and are incorporated herein by this reference. In the event of any discrepancy between this Lease and any such Exhibit or Addendum, this Lease shall control. This Lease is the entire and integrated agreement between Landlord and Tenant with respect to the subject matter of this Lease, the Premises and the Building. There are no oral agreements between Landlord and Tenant affecting this Lease, and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, offers, agreements and understandings, oral or written, if any, between Landlord and Tenant or displayed by Landlord to Tenant with respect to the subject matter of this Lease, the Premises or the Building. There are no representations between Landlord and Tenant or between any real estate broker and Tenant other than those expressly set forth in this Lease and all reliance with respect to any representations is solely upon representations expressly set forth in this Lease. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and this instrument is not effective as a lease or otherwise until its execution and delivery by both Landlord and Tenant.

 

11.26      Contingency . This Lease is contingent on the following: (a) Tenant’s receipt of an executed nondisturbance and attornment agreement from Fleet National Bank (“ Fleet ”), the current holder of a Superior Interest, in form and substance reasonably satisfactory to Tenant; (b) Tenant’s inspection of the UST and lab equipment, and (c) Landlord’s receipt of approval of this Lease from Fleet. The contingencies set forth in clauses (a) and (b) shall be satisfied or waived by Tenant and the contingency set forth in clause (c) shall be satisfied or waived by Landlord within fourteen (14) days after the date that Landlord and Tenant execute this Lease and a fully executed original counterpart is delivered to each other (the “ Contingency Period ”). Tenant shall make diligent efforts to negotiate the nondisturbance and attornment agreement and to conduct the inspections of the UST and lab equipment during the Contingency Period. Landlord shall use commercially reasonable efforts to obtain from Fleet the non-disturbance and attornment agreement and to provide access to the UST and lab equipment for inspection purposes. Landlord shall make diligent efforts to obtain the approval of Fleet to this Lease. If either (a) the nondisturbance and attornment agreement from Fleet is not executed and delivered to Tenant within the Contingency Period or (b) the inspection of the UST and lab equipment discloses that repairs in excess of One Hundred Thousand and 00/100 Dollars ($100,000.00) are

 

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required in order to place the UST and/or lab equipment in good mechanical and operating condition, Tenant shall have the right to terminate the Lease by sending written notice to Landlord within three (3) business days after the expiration of the Contingency Period. If Tenant does not deliver notice of its termination of the Lease within such three business day period, the contingencies set forth in clauses (a) and (b) above shall be deemed satisfied. If the approval of Fleet to this Lease is not obtained within the Contingency Period, Landlord shall have the right to terminate the Lease by sending written notice to Tenant within three (3) business days after the expiration of the Contingency Period. If Landlord does not deliver notice of its termination of the Lease within such three business day period, the contingency set forth in clause(c) shall be deemed satisfied.

 

[SIGNATURES FOLLOW ON NEXT PAGE]

 

70



 

Landlord and Tenant have executed this Lease as of the day and year first above written.

 

 

 

 

 

 

      TENANT :

 

 

 

CALIFORNIA PACIFIC MEDICAL CENTER,
a California non-profit public benefit corporation

 

 

 

 

 

By:

[ILLEGIBLE]

 

 

 

 

Its:

EVP

 

 

 

 

 

12 FEB 2004

 

 

 

 

 

 

 

 

 

 

 

      LANDLORD :

 

 

 

SKS BRANNAN ASSOCIATES, LLC,
a Delaware limited liability company

 

 

 

 

By:

SKS 475 MANAGING MEMBER, L.P., a Delaware limited partnership, its administrative member

 

 

 

 

 

 

 

By:

SKS 475 CORPORATE GP, INC., a Delaware corporation, its general partner

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BY:

[ILLEGIBLE]

 

 

 

 

 

 

 

 

 

 

Its:

President

 

71


 

 

Exhibit A

Floor plans showing premises

 

 

A-1



 

 

Exhibit A

Floor plans showing premises

 

A-2


 

EXHIBIT B

 

WORK LETTER

 

This Work Letter is attached to and forms a part of the Lease dated as of February             , 2004 (the “ Lease ”), by and between SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company (“ Landlord ”), and CALIFORNIA PACIFIC MEDICAL CENTER, a California non-profit public benefit corporation (“ Tenant ”), pertaining to certain Premises described therein. Except where clearly inconsistent or inapplicable, the provisions of the Lease are incorporated into this Work Letter, and capitalized terms used without being defined in this Work Letter shall have the meanings given them in the Lease.

 

The purpose of this Work Letter is to set forth the respective responsibilities of Landlord and Tenant with respect to the design and construction of all alterations, additions and improvements which Tenant may deem necessary or appropriate to prepare the Premises for occupancy by Tenant under the Lease. Such alterations, additions and improvements to the Premises are referred to in this Work Letter as the “ Leasehold Improvements ,” and the work of constructing the Leasehold Improvements to be performed by Landlord is referred to as the “ Landlord’s Work ” and is more fully described in Section 2 and the work of constructing the Leasehold Improvements to be performed by Tenant is referred to herein as “ Tenant’s Work ” and described with more specificity in Section 3.3 below.

 

Landlord and Tenant agree as follows:

 

1.             General .

 

1.1          Tenant is solely responsible for designing the Leasehold Improvements to be constructed by Tenant and performing the Tenant’s Work (subject to Landlord’s rights of review and approval set forth in this Work Letter).

 

1.2          Landlord’s sole interest in reviewing and approving the Space Plans and Final Working Drawings (as each of those terms is hereinafter defined) is to protect the Building and Landlord’s interests, and no such review or approval by Landlord shall be deemed to create any liability of any kind on the part of Landlord, or constitute a representation on the part of Landlord or any person consulted by Landlord in connection with such review and approval that the Space Plans or Final Working Drawings are correct or accurate, or are in compliance with any Legal Requirements.

 

1.3          Landlord shall contribute (subject to the terms and conditions set forth in this Work Letter) the amount specified in Section 5.1 below as the “ Construction Allowance ,” towards the costs of performing the Tenant’s Work.

 

1.4          Tenant shall be responsible for Tenant’s costs of designing the Leasehold Improvements to be performed by Tenant and performing the Tenant’s Work to the extent such costs exceed the Construction Allowance.

 

Exhibit B - 1



 

1.5          Except for the Landlord’s Work and as otherwise provided in the Lease, Tenant accepts the Premises in its “as is” condition and acknowledges that it has had an opportunity to inspect the Premises prior to signing the Lease.

 

2.             Landlord’s Work . Prior to delivery of the Premises to Tenant, Landlord shall perform Landlord’s Work as described herein. Landlord’s Work shall include the following: (a) activation of the Generator (as defined in Section 5.06 of the Lease) for the support of the Premises only and in accordance with all applicable Legal Requirements; and (b) delivery of the fume hoods in good working condition and order for use by Tenant for no additional rent during the term of the Lease.

 

3.             Design and Approval of the Leasehold Improvements .

 

3.1          Selection of Tenant’s Architect; Construction Drawings .

 

(a)           Tenant shall retain an architect/space planner (“ Tenant’s Architect ”) to prepare the plans and drawings for Tenant’s Work. Tenant’s Architect shall be an architect licensed in the State of California and approved in writing by Landlord, which approval will not be unreasonably withheld or delayed. Landlord hereby approves Smith Group, SMWM and/or SOM as Tenant’s Architect.

 

(b)           All plans and drawings for Tenant’s Work shall be subject to Landlord’s approval, which approval shall not be unreasonably withheld or delayed. To the extent in Landlord’s possession or control, Landlord shall supply Tenant with a set of “as-built” drawings of the Building which Tenant may use in connection with the preparation of the plans and drawings for Tenant’s Work, but Tenant agrees that Landlord shall have no liability for the completeness or accuracy thereof, and Tenant’s Architect shall be responsible for performing all necessary field measurements and confirming the completeness and accuracy of such drawings. Landlord shall provide to Tenant all reports in Landlord’s possession regarding the evaluation of the Real Property’s compliance with the ADA and Title 24 of the California Code of Regulations and the “close-out” report regarding the permit for Hazardous Substances previously issued to the current occupant of the Premises.

 

(c)           So long as Tenant retains the following engineers and contractors in connection with the mechanical and electrical design of Tenant’s Work, neither performance of such mechanical and electrical design work by Landlord’s mechanical or electrical engineers nor peer review by Landlord’s mechanical or electrical engineers of such design work performed by Tenant’s engineers shall be required: Tipping Mar + associates as structural engineers and Mazzetti & Associates as electrical engineers for Tenant’s Work to the first floor of the Premises and Southland as mechanical engineers and Cupertino Electric, Inc. as electrical contractors for Tenant’s Work to the second floor of the Premises.

 

3.2          Space Plans . Prior to drafting any construction plans and drawings, Tenant shall furnish Landlord with a hard copy and, to the extent available, an AutoCAD version on diskette, of Tenant’s final space plans for the Premises (“ Space Plans ”). The Space Plans shall show or specify the locations of all proposed improvements, including partitions, equipment and fixtures, the location of any proposed structural floor penetrations, the location and extent of

 

Exhibit B - 2



 

floor loading in excess of Building capacity, if any, and the location and description of any special HVAC, plumbing or electrical requirements. Landlord shall approve or disapprove the Space Plans by giving written notice to Tenant within ten (10) days after receipt thereof. Landlord shall not unreasonably withhold or condition its approval of the Space Plans. If Tenant’s proposed Leasehold Improvements will, in Landlord’s reasonable judgment, require changes or alterations in the fire protection sprinkler system, HVAC system or other building systems outside of the Premises, and Landlord approves such changes or alterations, such changes or alterations shall be made at Tenant’s expense. If Landlord disapproves the Space Plans, Landlord shall return the Space Plans to Tenant with a statement of Landlord’s specific and detailed reasons for disapproval and specifying any required corrections or revisions. Landlord shall approve or disapprove of any revisions or corrections to the Space Plans by written notice given to Tenant within five (5) business days after receipt of such revisions or corrections. This procedure shall be repeated until Landlord approves the Space Plans. If Landlord fails to respond to any request for approval of the Space Plans or revisions thereto in the time periods required under this Section 3.2, Landlord shall be deemed to have approved the Space Plans or revised Space Plans, as submitted.

 

3.3          Final Working Drawings . Following Landlord’s approval or deemed approval of the Space Plans, Tenant shall cause Tenant’s Architect to prepare and submit for Landlord’s approval complete and detailed construction plans and specifications, including a fully coordinated set of architectural, structural, engineering, mechanical, fire protection, electrical and plumbing working drawings for Tenant’s Work, in a form which is sufficiently complete to permit subcontractors to bid on the work, obtain all required Permits (as hereinafter defined) and commence construction (the “ Final Working Drawings ”). Landlord shall approve or disapprove the Final Working Drawings by giving written notice to Tenant within ten (10) days after receipt thereof. Landlord shall not unreasonably withhold or condition its approval of the Final Working Drawings. Landlord shall not disapprove the Final Working Drawings or require changes to the Final Working Drawings in a manner which is inconsistent with (a) the locations of any proposed improvements, including partitions, equipment and fixtures, (b) the location of any proposed structural floor penetrations, (c) the location and extent of floor loading, and (d) the location and description of any special HVAC, plumbing or electrical requirements, all as set forth in Space Plans approved by Landlord. If Landlord disapproves the Final Working Drawings, Landlord shall return the Final Working Drawings to Tenant with a statement of Landlord’s specific and detailed reasons for disapproval and specifying any required corrections or revisions. Landlord shall approve or disapprove of any such revisions to the Final Working Drawings within five (5) business days after receipt of such revisions. This procedure shall be repeated until Landlord approves the Final Working Drawings (as so approved, the “ Approved Working Drawings ”). If Landlord fails to respond to any request for approval of the Final Working Drawings or revisions thereto in the time periods required under this Section 3.3, Landlord shall be deemed to have approved the Final Working Drawings or revised Working Drawings, as submitted. The term “Tenant’s Work” shall mean all improvements shown on the Approved Working Drawings as finally approved by Landlord. Tenant shall be solely responsible for: (i) the completeness of the Approved Working Drawings; (ii) the conformity of the Approved Working Drawings with the existing conditions in the Building and the Premises; (iii) the compatibility of Approved Working Drawings with the shell or the core or the mechanical, plumbing, life safety or electrical systems of the Building; and (iv) the compliance of the Approved Working Drawings with all applicable regulations, laws, ordinances, codes and

 

Exhibit B - 3



 

rules, including, without limitation, the Americans With Disabilities Act. When the Approved Working Drawings are approved by Landlord and Tenant, they shall be acknowledged as such by Landlord and Tenant signing each sheet of the Approved Working Drawings. If the Approved Working Drawings were prepared on CAD system, Tenant shall also deliver to Landlord a diskette containing the Approved Working Drawings in the AutoCAD format.

 

4.             Construction of Leasehold Improvements .

 

4.1          Contracts with Tenant’s Contractor and Subcontractors .

 

(a)           Tenant shall retain a licensed general contractor as the contractor to perform Tenant’s Work (“ Tenant’s General Contractor ”). Tenant’s General Contractor must be experienced in the performance of work comparable to the work of the Tenant Works in buildings comparable to the Building, and shall be subject to Landlord’s prior approval, which approval shall not be unreasonably withheld or delayed. Landlord hereby approves any of the following general contractors as Tenant’s General Contractor: Herrero Brothers, Inc., Swinterton Incorporated, The Pankow Companies, Hathaway Dinwiddie and Rudolph and Sletten Inc.

 

(b)           Tenant shall furnish Landlord with a true and correct copy of the construction contract between Tenant and Tenant’s General Contractor relating to the Tenant’s Work, provided that Landlord’s review of such contract shall not relieve Tenant from its obligations under this Work Letter nor shall such review be deemed to constitute Landlord’s representation that such contracts comply with the requirements of this Work Letter. Tenant shall cause all subcontractors, laborers, materialmen and suppliers used by Tenant for Tenant’s Work (such subcontractors, laborers, materialmen and suppliers, together with Tenant’s General Contractor, are collectively referred to herein as “ Tenant’s Contractors ”) to engage only labor that is harmonious and compatible with other labor working in the Project. In the event of any labor disturbance caused by persons employed by Tenant or Tenant’s General Contractor, Tenant shall within one (1) business day take all reasonable actions necessary to eliminate such disturbance. If at any time any of Tenant’s Contractors materially interferes with any other occupant of the Building, or materially hinders or delays any other work of improvement in the Building, or performs any work which materially impairs the quality, integrity or performance of any portion of the Building, including any Building Systems, Tenant shall cause such subcontractor, laborer, materialman or supplier to leave the Building and remove all tools, equipment and materials immediately upon written notice delivered to Tenant.

 

4.2        Permits . Tenant shall obtain all building permits and other permits, authorizations and approvals which may be required in connection with, or to satisfy all Legal Requirements applicable to, the construction of the Leasehold Improvements in accordance with the Approved Working Drawings (the “ Permits ”). Tenant shall provide Landlord with copies of any documents or applications filed by Tenant to obtain Permits for Landlord’s review and approval prior to any such filing. Tenant agrees that neither Landlord nor Landlord’s consultants shall be responsible for obtaining any Permits or the certificate of occupancy for the Premises, and that obtaining the same shall be Tenant’s responsibility; provided, however, that Landlord will cooperate with Tenant in executing permit applications, attending hearings with governmental agencies, and performing ministerial acts reasonably necessary to enable Tenant to

 

Exhibit B - 4



 

obtain any such Permit or certificate of occupancy, provided Landlord approves of such permit applications and such applications or other acts do not impose any liability or other obligations on Landlord. Any amendments or revisions to the Approved Working Drawings that may be necessary to obtain any such Permits, or which may be required by city officials or inspectors to comply with code rulings or interpretations, shall be prepared by Tenant’s Architect, at Tenant’s expense (provided that to the extent funds are available, such expense may be reimbursed from the Construction Allowance), and submitted to Landlord for Landlord’s review and approval as a Change Order under Section 6 below. If Landlord disapproves of such amendments or revisions, Landlord shall, within five (5) business days after being submitted to Landlord for Landlord’s review, return the same to Tenant with a statement of Landlord’s reasons for disapproval, or specifying any required corrections. This procedure shall be repeated until Landlord approves the amendments or revisions and all Permits have been obtained for the Approved Working Drawings, as so amended. Tenant shall be solely responsible for any changes to the Space Plans and the Approved Working Drawings necessary to obtain any Permit or to comply with all applicable Legal Requirements or to achieve the compatibility, as reasonably determined by Landlord, of the Space Plans and Approved Working Drawings with the shell and the core and the mechanical, plumbing, life safety and electrical systems of the Building and any third-party warranties.

 

4.3          Commencement of Work . At least five (5) business days prior to the commencement of construction of the Leasehold Improvements to be performed by Tenant, Tenant shall submit to Landlord a notice specifying the date Tenant will commence construction of the Leasehold Improvements, the estimated date of completion of the Leasehold Improvements and the construction schedule provided by Tenant’s General Contractor. In addition, prior to the commencement of construction of the Leasehold Improvements, Tenant shall submit to Landlord the following: (a) all Permits required to commence construction of the Leasehold Improvements to be performed by Tenant; (b) a copy of the executed construction contract with Tenant’s General Contractor, in substantially the form previously approved by Landlord; and (c) true and correct copies of all policies of insurance, or original certificates thereof executed by an authorized agent of the insurer or insurers, together with any endorsement confirming to Landlord’s reasonable satisfaction compliance with the insurance requirements of this Work Letter.

 

4.4          Performance of Work . All work performed by Tenant’s General Contractor shall conform to the Approved Working Drawings, shall comply with all Legal Requirements and shall be performed in a good and professional manner and so as not to materially interfere with the occupancy of any other tenant of the Building, the performance of any other work within the Building, or with Landlord’s maintenance or operation of the Building. At all times during construction of the Leasehold Improvements, Landlord and Landlord’s employees and agents shall have the right to enter the Premises to inspect the Tenant’s Work, and to require the correction of any material deviation from the Approved Working Drawings.

 

4.5          Insurance . Prior to Tenant’s General Contractor’s entry onto the Premises to commence construction of the Leasehold Improvements to be constructed by Tenant, Tenant shall furnish Landlord with sufficient evidence that Tenant and Tenant’s General Contractor are

 

Exhibit B - 5



 

carrying worker’s compensation insurance and general liability insurance in amounts and in the manner described in the Lease.

 

4.6          Liens . Tenant shall keep the Premises and the Building free from any liens arising out of work performed, materials furnished or obligations incurred by Tenant. Should Tenant fail to remove any such lien within fifteen (15) days following Tenant’s receipt of written notice from Landlord or Tenant’s obtaining actual knowledge of such lien, Landlord may, in addition to any other remedies, record a bond pursuant to California Civil Code Section 3143 and all costs and obligations incurred by Landlord in so doing shall immediately become due and payable by Tenant to Landlord as Additional Rent under the Lease. Landlord shall have the right to post and keep posted on the Premises any notices that may be required or permitted by Legal Requirements, or which Landlord may deem to be proper, for the protection of Landlord and the Building from such liens. Upon completion of construction, Tenant shall promptly record a Notice of Completion in accordance with California Civil Code Section 3093 and provide a copy thereof to Landlord.

 

5.             Responsibility for Design and Construction Costs .

 

5.1          Construction Allowance . Landlord will contribute to the costs of performing Tenant’s Work, as depicted on the Approved Working Drawings, the amount of Four Hundred Twenty Eight Thousand Five Hundred Forty and 00/100 Dollars ($428,540.00) (the “ Construction Allowance ”). Tenant shall pay all costs in excess of the Construction Allowance for the design and construction of the Leasehold Improvements to be constructed by Tenant. The obligation of Landlord to make any one or more payments pursuant to the provisions of this Work Letter, including payment of the Construction Allowance, to review documents or to give approvals shall be suspended without further act of the parties during any such time as there exists an event of Default.

 

5.2          Disbursement of Construction Allowance . From time to time, but in no event more frequently than once every thirty (30) days, Tenant shall deliver to Landlord: (i) copies of applicable invoices, (ii) a written statement from Tenant’s Architect that the work described on any such invoices has not previously been paid for and has been completed substantially in accordance with the Approved Working Drawings, and (iii) properly executed lien waivers from Tenant’s General Contractor to the extent of the work described in such invoices. Within thirty (30) days after receipt of the foregoing, Landlord shall deliver a check to Tenant made payable to Tenant for Landlord’s Share (as defined below) of each amount of hard and soft costs invoiced by Tenant’s Architect or Tenant’s General Contractor that has not previously been paid less a ten percent (10%) retention. As used herein, “ Landlord’s Share ” shall be a fraction, the numerator of which is the Construction Allowance, and the denominator of which is the cost estimated by Tenant’s General Contractor and Tenant’s Architect of designing and constructing the Leasehold Improvements to be constructed by Tenant in accordance with the terms of this Work Letter. The final installment of the Construction Allowance, including all retentions, shall be paid to Tenant after satisfactory completion of the Tenant’s Work and submission by Tenant of (1) “as-built” drawings (in hard copy and in AutoCAD format on a diskette) showing the Leasehold Improvements performed by Tenant (updated by Tenant’s Architect as necessary to reflect all changes made to the Approved Working Drawings during the course of construction), (2) a written statement from Tenant’s

 

Exhibit B - 6



 

Architect that the work described on any such invoices has been completed substantially in accordance with the Approved Working Drawings, (3) properly executed mechanics’ lien releases in compliance with both California Civil Code Section 3262(d)(2) and Section 3262(d)(4) from Tenant’s General Contractor; and (4) copies of all Permits, licenses, certificates and other governmental authorizations and approvals necessary in connection with, and indicating final approval of, the Tenant’s Work, and which may be necessary for the operation of Tenant’s business within the Premises. Tenant shall submit the documents described in clauses (1) through (4) above to Landlord within thirty (30) days following the earlier of substantial completion of Tenant’s Work or the date Tenant commences business operations in the Premises.

 

6.             Change Orders . Landlord will not withhold its approval of (a) any request by Tenant, or by Tenant’s General Contractor with Tenant’s approval, to amend or change the Approved Working Drawings, or (b) any change or amendment to the Approved Working Drawings that may be necessary to obtain any Permits, or which may be required by city officials or inspectors to comply with code rulings or interpretations (any of the foregoing, a “ Change Order ”), unless, in Landlord’s reasonable judgment, any of the conditions specified in clauses 3.2(a) and 3.2(b) above would apply. Landlord shall approve or disapprove the Change Order by giving written notice (specifying Landlord’s reasons for denial of approval if approval has not been granted) given to Tenant within five (5) days after receipt of such Change Order request. No material changes or modifications to the Approved Working Drawings shall be made unless by written Change Order signed by Landlord and Tenant. Tenant shall pay all costs attributable to Change Orders, including costs incurred by Landlord in reviewing proposed Change Orders (provided that to the extent funds are available, such costs may be paid or reimbursed from the Construction Allowance).

 

7.             Ownership of Leasehold Improvements . The Leasehold Improvements made by Tenant shall become Landlord’s property and shall be surrendered by Tenant at the expiration or earlier termination of the Term, unless Landlord shall have conditioned its approval of the Final Working Drawings or any Change Order on Tenant’s agreement to remove any items thereof, in which event, prior to the expiration or termination of the Term, the specified items shall be removed at Tenant’s expense, any damage caused by such removal shall be repaired, and the Premises shall be restored to their condition existing prior to the installation of the items in question, normal wear and tear excepted. Notwithstanding the foregoing, Landlord agrees that, all portions of the Leasehold Improvements constituting the vivarium lab and customary general office improvements as reasonably determined by Landlord shall not be required to removed by Tenant upon the expiration or termination of the Term.

 

8.             Miscellaneous. Tenant hereby designates Jeanne Gomez, Kerry Shanahan and Kip Edwards, as its representatives with respect to the matters set forth in this Work Letter, any one of whom acting alone, until further notice to Landlord, shall have full authority and responsibility to act on behalf of Tenant as required in this Work Letter, and Landlord shall be entitled to rely upon the decisions and agreements made by such representative acting alone as binding upon Tenant. Landlord hereby designates Daniel Kingsley and Drew Gordon, as its representatives with respect to the matters set forth in this Work Letter, either of which representative acting alone, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Work Letter and Tenant shall be entitled to rely upon the decisions and agreements made by such representative acting alone as

 

Exhibit B - 7



 

binding upon Landlord. This Work Letter shall not be deemed applicable to any additional space added to the original Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premises or any additions thereto in the event of damage or destruction of the Premises, condemnation of the Premises, or renewal or extension of the initial term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement thereto.

 

Exhibit B - 8



 

SCHEDULE 1

 

LIST OF LAB EQUIPMENT

 

Exhibit B - 1


 

475 Brannan Floor 1 Lab equipment

 

Floor 1 Lab 1

 

Qty

 

System Components

 

Manuafacturer

 

Model

1

 

Chiller System/2 compressors

 

Trane

 

RTAA0704XM01B3D0N

1

 

Chilled Water Pump

 

Bell & Gossett

 

Series 80

1

 

HW Boiler 1

 

Teledyne Larrs

 

HH0850EN09LBACC

1

 

Hot Water Pump 1

 

Bell & Gossett

 

Series 80 BF7.875

1

 

Air Handing Unit 1

 

Haakon

 

 

1

 

Air Handing Unit 2

 

Haakon

 

Pentpack

1

 

Freezer 1

 

Bally

 

RPH151L6-IS2A

1

 

Exhaust Fan 1

 

Loren Cook

 

135-CPS50

1

 

Exhaust Fan 2

 

Loren Cook

 

225-CPS

1

 

Ceiling Mount a/c unit

 

Liebert

 

MME018A

1

 

Industrial Air Compressor

 

Atlas Copco

 

GA5FF

1

 

Industrial Vacuum Pump

 

Rietschle

 

VCTS-060-121-F-466

1

 

Autoclave

 

Primus

 

 

1

 

Steam Scrubber/Glass Wash

 

Labconco

 

 

2

 

Fume Hood 4 foot

 

Kewaunee

 

H05

2

 

Exhuasted Biosafety cabinet 6 foot

 

Fisher Hamilton Safeair

 

 

1

 

Exhuasted Biosafety cabinet 6 foot

 

Labconco

 

36213

1

 

Exhuasted Biosafety cabinet 5 foot

 

Labconco

 

36209

1

 

Sens gas manifold system

 

Victor

 

VM2000

 

 

 

 

 

 

 

Floor 1 Lab 2

 

 

 

 

 

 

 

 

 

 

 

 

 

Qty

 

System Components

 

Manuafacturer

 

Model

1

 

Chiller System/2 Compressors

 

Trane

 

RTAA0704XM01B3D0N

1

 

Chilled Water Pump

 

Bell & Gossett

 

Series 80

1

 

HW Boiler 2

 

Teledyne Larrs

 

HH1200EN09LBACC

1

 

Hot Water Pump 2

 

Bell & Gossett

 

Series 80 BF7.875

1

 

Air Handling Unit 3

 

Haakon

 

Pentpack

1

 

Cooler 1

 

Bally

 

BA82P-A-AS2A

1

 

Freezer 2

 

Bally

 

RPH151L6-IS2A

1

 

Exhaust Fan 3

 

Loren Cook

 

210-CP

1

 

Exhaust Fan 4

 

Loren Cook

 

225-CPS

1

 

Exhaust Fan 5

 

Loren Cook

 

225-CPS50

1

 

Exhaust Fan Tl

 

Loren Cook

 

 

2

 

Sump Pump

 

Ryan Herco

 

 

1

 

Industrial Vacuum Pump

 

Airtech

 

LCS-L25G1

1

 

Autoclave

 

AMSLO

 

2031

 



 

Serial  #

 

Rating

 

Location

U02B03161

 

70 Tons

 

Roof Zone 1

 

 

7.5 HP

 

Roof Zone 1

C02B01160

 

25 BLR HP

 

Roof Zone 1

CM0062-01

 

2 HP

 

Roof Zone 1

 

 

1.5 HP

 

Lab 1 Ceiling

02-8113-01-C

 

20 HP

 

East Alley

2027401

 

2 Tons

 

Lab 1

21573-2148

 

2 HP

 

Roof Zone 1

21573-2149

 

7.5 HP

 

Roof Zone 1

 

 

1/4 HP

 

Lab 1 phone

 

 

20 HP

 

Basement

 

 

10 HP

 

Basement

 

 

 

 

Lab1

 

 

 

 

Lab 1

 

 

 

 

Lab 1

 

 

 

 

Lab 1

 

 

 

 

Lab 1

 

 

 

 

Lab 1

 

 

 

 

Lab 1

 

 

 

 

 

Serial  #

 

Rating

 

Location

U02D04464

 

70 Tons

 

Roof Zone 2

 

 

7.5 HP

 

Roof Zone 2

C02D03113

 

35 BLR HP

 

Roof Zone 2

CM4631-01D20

 

3 HP

 

Roof Zone 2

02-8079-02-C

 

25 HP

 

East Alley

2014849

 

2 Tons

 

Lab 2

207402

 

2 Tons

 

Lab 2

21573-2147

 

5 HP

 

Roof Zone 2

21573-2146

 

5 HP

 

Roof Zone 2

21573-2150

 

5 HP

 

Roof Zone 2

 

 

3/4 HP

 

Lab 2 phone

 

 

3/4 HP

 

Basement

 

 

1 HP

 

LAB 2

 

 

 

 

LAB 2

 


NOTE* I have notice a Sciex tag on the unit.

 



 

EXHIBIT C

 

CONFIRMATION OF TERM OF LEASE

 

This confirmation of lease and description of premises is made               , 2004, between SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company, (“ Landlord ”), and CALIFORNIA PACIFIC MEDICAL CENTER, a California non-profit public benefit corporation (“ Tenant ”), who agree as follows:

 

1.            Landlord and Tenant entered into a Standard Form Office Lease dated                             , 2004, in which Landlord leased to Tenant and Tenant leased from Landlord the premises described in Section 1.04 of the Lease (the “ Premises ”).

 

2.             Pursuant to Sections 1.05 and 3.01 of the Lease, Landlord and Tenant agree to confirm the Commencement Date and the expiration date of the term as follows:

 

A.                              , 20   , is the Commencement Date of the Lease;

 

B.                              , 20   , is the expiration date of the Lease.

 

3. Tenant confirms that:

 

A.            It has accepted possession of the Premises as provided in the Lease;

 

B.            The Lease has not been modified, altered, or amended, except as follows:

 

 

 

C.            The Lease is in full force and effect.

 

C-1



 

4.             The provisions of this confirmation shall inure to the benefit, or bind, as the case may require, the parties and their respective successors subject to the restrictions on assignment and subleasing contained in the Lease.

 

 

 

 

 

 

      TENANT:

 

 

 

CALIFORNIA PACIFIC MEDICAL CENTER,

 

a California non-profit public benefit corporation

 

 

 

By:

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

 

 

 

 

      LANDLORD:

 

 

 

SKS BRANNAN ASSOCIATES, LLC, a Delaware
limited liability company

 

 

 

 

By:

SKS 475 MANAGING MEMBER, L.P., a Delaware limited partnership, its administrative member

 

 

 

 

 

 

 

By:

SKS 475 CORPORATE GP, INC., a Delaware corporation, its general partner

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BY:

 

 

 

 

 

 

 

 

 

 

 

Its:

 

 

C-2



 

EXHIBIT D

 

RULES AND REGULATIONS

 

1.             Sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed by tenants or used by them for any purpose other than for ingress to and egress from their respective premises. The halls, passages, exits, entrances, elevators, escalators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the reasonable judgment of Landlord, would be prejudicial to the safety, character, reputation and interests of the Building and its tenants.

 

2.             No sign, placard, picture, name, advertisement or notice, visible from the exterior of the leased premises shall be inscribed, painted, affixed or otherwise displayed by any tenant either on its premises or any part of the Building without the prior written consent of Landlord, and Landlord shall have the right to remove any such sign, placard, picture, name, advertisement, or notice without notice to and at the expense of the tenant.

 

3.             If Landlord shall have given such consent to any tenant at any time, whether before or after the execution of the Lease, such consent shall in no way operate as a waiver or release of any of the provisions hereof or of such Lease, and shall be deemed to relate only to the particular sign, placard, picture, name, advertisement or notice so consented to by Landlord and shall not be construed as dispensing with the necessity of obtaining the specific written consent of Landlord with respect to any other such sign, placard, picture, name, advertisement or notice.

 

4.             No signs will be permitted on any entry door unless the door is glass. All glass door signs must be approved by Landlord. Signs or lettering shall be printed, painted, affixed or inscribed at the expense of the tenant by a person reasonably approved by Landlord

 

5.             The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of tenants only, and Landlord reserves the right to exclude any other names therefrom. Landlord reserves the right to restrict reasonably the amount of directory space utilized by Tenant.

 

D-1



 

6.             No curtains, draperies, blinds, shutters, shades, screens or other coverings, hangings or decorations shall be attached to, hung or placed in, or used in connection with, any window on any premises without the prior written consent of Landlord. In any event, with the prior written consent of Landlord, all such items shall be installed inside of Landlord’s standard draperies and shall in no way be visible from the exterior of the Building. No articles shall be placed or kept on the window sills so as to be visible from the exterior of the Building.

 

7.             Landlord reserves the right to exclude from the Building between the hours of 7 P.M. and 7 A.M. and at all hours on Saturdays, Sundays and holidays all persons who do not present a pass to the Building signed by Landlord. Landlord will furnish passes to persons for whom any tenant requests the same in writing. Each tenant shall be responsible for all persons for whom it requests passes and shall be liable to Landlord for all acts of such persons.

 

8.             Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person.

 

9.             During any invasion, mob, riot, public excitement or other circumstance rendering such action advisable in Landlord’s opinion, Landlord reserves the right to prevent access to the Building by closing the doors, or otherwise, for the safety of tenants and protection of the Building and property in the Building.

 

10.          No tenant shall cause any unnecessary labor by reason of such tenant’s carelessness or indifference in the preservation of good order and cleanliness. Exterior window cleaning shall be done only by Landlord, and at such intervals and such hours as Landlord shall deem appropriate but at least twice in each calendar year.

 

11.          RESERVED.

 

12.          Each tenant shall see that the doors of its premises are closed and securely locked and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before the tenant or its employees leave such premises, and that all utilities shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness the tenant shall make good all injuries sustained by other tenants or occupants of the Building or

 

D-2



 

Landlord. On multiple-tenancy floors all tenants shall keep the door or doors to the Building corridors closed at all times except for ingress and egress.

 

13.          No tenant shall alter any lock or install a new or additional lock or any bolt on any door of its premises without the prior written consent of Landlord. If Landlord shall give its consent, the tenant shall in each case furnish Landlord with a key for any such lock.

 

14.          Landlord will furnish Tenant without charge two (2) keys to each door lock provided in the Premises by Landlord. Landlord may make a reasonable charge for any additional keys. Tenant shall not have any such keys copied or any keys made, except Tenant shall have the right to copy keys to interior doors. Each tenant, upon the termination of the tenancy, shall deliver to Landlord all the keys of or to the Building, offices, rooms and toilet rooms that shall have been furnished to the Tenant or that the Tenant shall have had made. In the event of the loss of any keys so furnished by Landlord, Tenant shall pay Landlord therefor.

 

15.          The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein, and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it.

 

16.          No tenant shall use or keep in its premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material or use any method of heating or air conditioning other than that supplied by Landlord; provided however that, notwithstanding the foregoing, Tenant shall be permitted to keep the types of fluids and materials described in Section 5.05A of the Lease in the Premises pursuant to the terms of the Lease.

 

17.          No tenant shall use, keep or permit to be used or kept in its premises any foul or noxious gas or substance or permit or suffer such premises to be occupied or used in a manner materially offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations or interfere in any material way with other tenants or those having business therein, nor shall any pets be brought or kept in or about the premises or the Building..

 

D-3



 

18.          No cooking shall be done or permitted by any tenant on its premises, except that the preparation of coffee, tea, hot chocolate and similar items for tenants and their employees and the use of microwave ovens shall be permitted, nor shall such premises be used for lodging.

 

19.          Except with the prior written consent of Landlord, no tenant shall sell, or permit the sale, at retail of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on any premises, nor shall any tenant carry on, or permit or allow any employee or other person to carry on, the business of stenography, typewriting or any similar business in or from any premises for the service or accommodation of occupants of any other portion of the Building, nor shall the premises of any tenant be used for the storage of merchandise or for manufacturing of any kind, or the business of a public barber shop, beauty parlor, or any business or activity other than that specifically provided for in such tenant’s lease.

 

20.          Landlord will direct electricians as to where and how telephone, telegraph and electrical wires are to be introduced or installed. No boring or cutting for wires will be allowed without the prior written consent of Landlord, which shall not be unreasonably withheld. The location of telephones, call boxes and other office equipment affixed to all premises shall be subject to the written approval of Landlord, which shall not be unreasonably withheld. All electrical appliances must be grounded and must meet UL Label Standards.

 

21.          No tenant shall install any radio or television antenna, loudspeaker or any other device on the exterior walls or roof of the Building.

 

22.          No tenant shall lay linoleum, tile, carpet or any other floor covering so that the same shall be affixed to the floor of its premises in any manner except as approved in writing by Landlord, which approval shall not be unreasonably withheld. The expense of repairing any damage resulting from a violation of this rule or the removal of any floor covering shall be borne by the tenant by whom, or by whose contractors, employees or invitees, the damage shall have been caused.

 

23.          No furniture, freight, equipment, packages or merchandise shall be received in the Building or carried up or down the elevators, except between such hours, through such entrances and in such elevators as shall be designated by Landlord. Landlord reserves the right to require

 

D-4



 

that moves be scheduled and carried out during non-business hours of the Building, except for Tenant’s initial “move-in” which shall be accomplished during regular business hours but in a manner that does not disrupt other tenants in the Building. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on wood strips of such thickness as is necessary to properly distribute the weight thereof. Landlord will not be responsible for loss of or damage to any such safe or property from any cause, and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of the tenant.

 

24.          Except in connection with the hanging or installation of artwork, no tenant shall overload the floor of its premises or mark, or drive nails, screw or drill into, the partitions, woodwork or plaster or in any way deface such premises or any part thereof.

 

25.          There shall not be used in any space, or in the public areas of the Building, either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards. No other vehicles of any kind shall be brought by any tenant into or kept in or about any premises in the Building.

 

26.          Each tenant shall store all its trash and garbage within the interior of its premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the City of San Francisco without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate.

 

27.          Canvassing, soliciting, distribution of handbills and other written materials and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same.

 

28.          The requirements of tenants will be attended to only upon application at the office of the Building. Employees of Landlord shall not perform any work or do anything outside of

 

D-5



 

their regular duties unless under special instructions from Landlord, and no employee will admit any person (tenant or otherwise) to any office without specific instructions from Landlord.

 

29.          Tenant agrees not to employ any person, entity or contractor for any work in the Premises (including moving Tenant’s equipment and furnishings in, out of or around the Premises) whose presence may give rise to a labor or other disturbance in the Building, and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for the work.

 

30.          Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Building.

 

31.          These Rules and Regulations may be changed from time to time, as Landlord may deem appropriate, and are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants and conditions of the Lease.

 

D-6


 

EXHIBIT E

 

CONSTRUCTION RULES AND REGULATIONS

 

475 Brannan Street – Revised 10/1/03

 

1.               Prior to commencement of any construction, Tenant’s Contractor shall coordinate with Landlord’s representatives to ensure that all employees and subcontractors of Tenant’s Contractor have received instruction regarding Landlord’s requirements for safety, security and fire prevention. All work to be performed shall be coordinated with the managing agent of the Building or its representative. During construction, tenant shall coordinate all construction activities with Landlord’s Building manager so as to minimize the disruption caused by such construction, and so as not to interfere with other construction in the Building or the rights of Landlord, other tenants or occupants.

 

2.               Tenant and Tenant’s Agents shall take all safety measures necessary to protect Landlord, its employees and contractors, other tenants and users of the building and the general public, and the property of each, from injury or damage resulting from the performance of the Tenant’s Improvement Work.

 

3.               Tenant and Tenant’s Contractor acknowledge that certain construction activities (including, without limitation, tackless carpet strips, water shut-off, x-rays, coring, spray painting, jack-hammering, and use of “shot” type mechanical fasteners which create excessive of explosive-type noises) must commence no earlier than 7:00 am on weekdays and be completed by 8:00 am and may not resume until at least 6:30 p.m. on weekdays and be completed by 8:00 pm. At least three business days in advance, the Contractor or Tenant shall make prior arrangement with Landlord’s representatives if any construction work is to be performed between 10:00 am and 8:00 pm or on weekends, and Landlord may charge Tenant or Contractor a reasonable sum, as determined by Landlord, to defray the cost of providing a representative of Landlord or Landlord’s Building manager, and/or additional security personnel, to be present at all times. The Tenant or Contractor should provide Building manager with a complete list of all access to be scheduled for the following week, including location, times, trade, type of work.

 

4.               All construction work and all storage and staging of materials, tools and equipment shall be confined to the Premises, unless Landlord gives written permission to use area outside the Premises. Common and public areas of the Building and the sidewalk and curbs in front of or adjacent to the Building shall not be used or obstructed by Tenant or by Tenant’s Agents without written approval of Landlord. All storage of materials, tools and equipment within the Premises or the Building shall be at Tenant’s risk. Tenant shall immediately relocate at Tenant’s expense, any materials found by Landlord to be stored in an unsafe manner. Landlord shall not be responsible of lost, stolen or damaged materials, tools or equipment stored or staged in the Building.

 

E-1



 

5.               Workers may use only the restrooms on the floors on which they are working. Restrooms are not to be used for purposes related to Tenant’s construction, including, without limitation, for the cleaning of tools, or any other purposes other than the use for which they are intended. Workers must keep areas neat and clean and avoid any disruption to the tenants of the floor. Tenant will be charged if extraordinary cleanup of bathrooms is required.

 

6.               All deliveries shall be scheduled in advance with the Building management office so that materials are stocked in Tenant’s premises prior to 7:45 am. No deliveries shall be made through the main entry lobby of the Building, or to the sidewalk in front of or adjacent to the Building during business hours. No hand trucks shall be used in any portion of the Building, including common areas, except those equipped with rubber tires and side guards. Protective floor covering and doorframe pads must be installed in common areas, which shall be removed at completion of delivery each day.

 

7.               Landlord will not provide off-street parking for Tenant’s Agents’ vehicles. Loading zones are for loading and unloading purposes only, and no parking in loading zones is permitted. Vehicles parked illegally will be subject to towing at the expense of Tenant or the vehicle owner.

 

8.               Tenant and Tenant’s Contractor shall be responsible for ensuring that all doors, gates and windows are closed and locked at all times when not in immediate use.

 

9.               Tenant’s Agents are not permitted to transport tools or materials in wheelbarrows or wheeled vehicles in the interior common or public areas of the Building at any time, or in the exterior common or public areas of the Building during normal business hours.

 

10.        All work which affects the building life safety system, including, but not limited to, soldering, carpet seaming equipment, smoke detectors, etc., will need to be coordinated with the building management office in order to avoid false fire alarms. This work to be arranged by General Contractor’s job supervisor or foreman. All zones under construction will have one smoke detector, flow and tamper active. The remaining units are to be temporarily deprogrammed from fire alarm system until all work that may cause accidental activation has been completed. Should the alarm be triggered by construction and the Fire Department summoned to the property, the fine the property will be levied will be passed on to the contractor and/or worker responsible.

 

11.        All construction shall be performed so as to prevent dust from filtering through to other parts of the building. All painting shall be shielded and other parts of the Building shall be protected from all fumes and sprays. General Contractor to provide walk-off mats and/or dust barrier to prevent dust from traveling into common area. All temporary partitions and dust-proof barriers shall remain intact at all times. Should any panel be removed, torn or otherwise displaced or damaged, it will be reattached or repaired and Tenant will be back charged at a reasonable labor and material charge.

 

E-2



 

12.        All sprinkler or life safety shutdowns require 48-hour advance notice to the Building Office and coordinated with the Chief Engineer. All systems are to be returned to functional order by 3:30 pm.

 

13.        Hazardous and/or flammable materials brought onto the premises or into the building in connection with Tenant’s construction shall be used and stored in containers which conform to all applicable laws and regulations, and shall be used in a manner which prevents their accidental release. Upon bringing Hazardous Materials into the Building, Tenant or Tenant’s Contractor shall immediately provide Landlord’s Building manager with a copy of the Material Safety Data Sheets (MSDS) for such Hazardous Material. In addition, a new MSDS shall be provided whenever MSDS information is revised. Hazardous Materials, including empty containers and hazardous wastes, shall not be discarded in the premises or the building, but shall be removed immediately and disposed of in a proper, lawful manner. Tenant’s Contractor shall comply with all federal and state OSHA Safety Regulations.

 

14.        Tenant and Tenant’s Contractor shall maintain the Premises and related building facilities, surfaces and glass in a clean, orderly condition during the progress of construction, and shall clean up debris and remove trash daily, to the satisfaction of Landlord. Tenant shall make arrangements to remove dirt and debris from work after the end of each workday. No individual trash or storage containers will be allowed in the common or public areas of the Building. Any containers provided by Landlord to Tenant for construction debris shall be at Tenant’s expense. Where Landlord does not provided containers for removal of debris, Tenant or Tenant’s Contractor shall arrange for trash removal service by a debris or scavenger service only after approval by Landlord is granted. Any dirt, debris, construction materials or equipment remaining in the common or public areas of the Building, or in service corridors or adjoining unoccupied spaces, after commencement of normal business hours, will be removed by Landlord, and Tenant will be back charged at a reasonable rate for labor and material charges.

 

15.        Electrical power shall be provided at Tenant’s expense at a suitable existing electrical outlet or other source reasonably near the boundary of the Premises. Tenant shall be responsible for installing a temporary electrical panel and arranging for commencement of electrical, water and other utility services in Tenant’s name as early in the construction process as is possible. Temporary or portable wiring beyond the outlet or other source shall be furnished and installed by and at the expense of Tenant and shall comply with all applicable laws and codes. All temporary electrical connections must be approved in advance by Landlord’s representatives prior to installation. Tenant and Tenant’s Agents shall use their respective best efforts to use the minimal amount of water necessary for work and cleanup of the Premises.

 

16.        Construction workers are not permitted to eat, drink, or play radios in the common or public areas of the Building, except to eat within the premises under construction prior to installation of carpet. In accordance with the San Francisco City and County Ordinance No. 359-93, smoking is prohibited in all areas of the Building at all times.

 

E-3



 

17.        Tenant shall not attach or cause to be attached to any wall or structural member of the Building any equipment that may, by virtue of its size or weight, cause structural damage. Tenant shall not exceed the load as set forth in the plans and specifications for the floor of the Building and shall not do anything that might in any way alter or affect the structural strength of the Building. Building Management reserves the right to have Contractors uses the building structural engineer to review any work that may affect or alter the structural strength of the building.

 

18.        All HVAC equipment and controls shall be building standard as approved by the Building Management. Upon completion of construction, Contractor shall re-balance the HVAC system and submit a balancing report to the Chief Engineer.

 

19.  Contractor shall furnish a typed electrical panel schedule to the Chief Engineer.

 

20.        All fluorescent light fixtures, doors, frames, hardware, and life safety equipment shall be building standard. All emergency light fixtures will be designated by an orange dot on the fixture.

 

21.        If appropriate, as determined by Landlord or as required by any Applicable Laws, a smoke and/or heat detector shall be installed in Tenant’s space, at Tenant’s expense, during the time any construction work is being performed in the Premises. The smoke and/or heat detector shall be connected by Landlord’s specified contractor to the central system at Tenant’s expense, if such control system is available.

 

22.        All contractors working on-site must provide a current Certificate of Insurance evidencing coverage as per the attached Contractor Insurance form. We will require the certificates to be submitted to the Building manager prior to commencement of work as a single package delivered by Contractor or Tenant.

 

23.        Contractor shall not prop open, tape or detach door closer arms on required fire doors or base building facilities. Doors to equipment and electrical rooms shall not be left open when Contractor is not present.

 

24.        Contractor shall notify the Building Office at least 48 hours in advance of completion of construction. A walk-through and punchlist will be made of each job, the associated costs of which shall be borne by the Contractor.

 

25.        All workers must be Union.

 

26.        Upon completion of construction, two sets of as-built prints, one set of as-built sepias and one set of prints on autocad disk shall be forwarded to the Building Office.

 

27.        Except to the extent provided in the Lease to the contrary, expenses incurred by Landlord in respect of the work performed by or on behalf of Tenant shall be paid by Tenant immediately upon receipt of an invoice from Landlord and shall be delinquent if not paid within ten (10) days. Late charges, interest and collection expenses on delinquent

 

E-4



 

payments shall be charged to Tenant in the manner set forth in the Lease for delinquent payment of rents.

 

28.        All doors to construction areas are to be closed at all times to keep tenants from entering the space. Contractors, as well, are restricted from entering any tenant space unless previously arranged with the Management Office.

 

29.        All contractors are to enter the building through the loading dock and can reach floors by using the freight elevator or stairwell #2.

 

30.        Keys for shared telephone/electrical rooms can be checked out at the Security Guard’s desk in the 1 st  floor lobby. If keys are lost, the last contractor to have signed them out will be responsible for the costs associated with rekeying the rooms.

 

31.        All contractors to wear clothing which identifies his or her company. This will help to insure that everyone in the building belongs in the building. The contractor badges must also be worn at all times while on the premises.

 

32.        General Contractor is to supply one (1) copy of all approved equipment submittal to building management.

 

33.        All contractors and related personnel are to use the freight elevator only. No access is permitted for any reason on any of the passenger elevators.

 

34.        After one written notice, a Global Penalty will apply for any corrective action taken by the Landlord with regards to number one (1) through thirty three (33) above. This will include the cost of the corrective actions if so applicable plus a penalty of $100 per incident.

 

 

ACKNOWLEDGEMENTS

 

Any contractor who violates these Building Rules will be ejected from the Building and may be denied future access.

 

I

, representative of

 

have

(Print Name)

 

(Print Company Name)

 

 

 

 

 

read and understand the rules stated above.

 

 

 

 

 

 

 

(Signature)

 

(Date)

 

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EXHIBIT F

 

LIST OF EXISTING FURNITURE

 

40 File Cabinets

 

43 Rolling Tables with Shelf

 

39 Rolling Rectangular Tables

 

9 Semi Round Tables

 

F-1


 

FIRST AMENDMENT TO LEASE

(EXPANSION AND EXTENSION)

 

This First Amendment to Lease (the “First Amendment”) is entered into as of November 29, 2006 (the “Effective Date”), by and between PRU/SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company (“Landlord”), and CALIFORNIA PACIFIC MEDICAL CENTER, a California nonprofit public benefit corporation (“Tenant”), with respect to the following facts and circumstances:

 

A.             Landlord, as successor in interest to SKS Brannan Associates, LLC, and Tenant are parties to that certain Lease dated February 13, 2004 (the “Original Lease”), of certain premises containing approximately 42,647 rentable square feet and commonly referred to as Suites 120, 130 and 220 (the “Existing Premises”) within the building commonly known as 475 Brannan Street, San Francisco, California, and more particularly described in the Original Lease. Capitalized terms used and not otherwise defined herein shall have the meanings given those terms in the Original Lease.

 

B.             Landlord and Tenant desire to amend the Original Lease to add additional space on the terms and conditions provided herein.

 

IT IS THEREFORE, agreed as follows:

 

1.              As used in this First Amendment, the following terms have the following meanings:

 

“Expansion Improvements” means the Tenant Improvements constructed in the Expansion Space.

 

“Expansion Space” means a portion of the Building, containing approximately 19,184 rentable square feet of area based upon measurements made in accordance with BOMA Standard (ANSI Z65.1, 1996) for commercial office space, and more particularly shown on Exhibit “A-1” attached hereto.

 

“Expansion Space Commencement Date” shall mean that date that is the earlier of March 1, 2007 and Tenant’s occupancy of the Expansion Space.

 

“Expansion Space Delivery Date” shall mean that date on which Landlord delivers the Expansion Space to Tenant following completion of Landlord’s Expansion Work, which shall be no later than February 28, 2007; provided that the foregoing date of February 28, 2007, shall be extended by one (1) day for each day after November 29, 2006, until Tenant delivers to Landlord a fully executed original of this First Amendment.

 

“New Expiration Date” shall have the meaning set forth in Paragraph 8 of this First Amendment.

 

1



 

2.              Effective on the Expansion Space Commencement Date, the Premises shall be expanded to include the Expansion Space. Accordingly, effective on the Expansion Space Commencement Date, the following terms of the Original Lease are amended as follows:

 

2.1        The Expansion Space is added to the Premises such that the Premises shall be comprised of the Existing Premises and the Expansion Space, and Exhibit “A-1” attached hereto is hereby added to Exhibit “A” to the Original Lease.

 

2.2        Tenant’s Percentage Share is increased to 25.3%.

 

2.3        Section 1.07A of the Original Lease is deleted in its entirety and the following is inserted in place thereof:

 

EXISTING PREMISES (SUITES 120 and 130):

 

 

 

Monthly

 

Annually (Per

 

Annual

 

Period

 

Base Rent

 

Square Foot)

 

Base Rent

 

 

 

 

 

 

 

 

 

December 1, 2004 to November 30, 2005

 

$

62,319.67

 

$

26.50

 

$

747,830.00

 

 

 

 

 

 

 

 

 

December 1, 2005 to November 30, 2006

 

$

64,670.83

 

$

27.50

 

$

776,050.00

 

 

 

 

 

 

 

 

 

December 1, 2006 to November 30, 2009

 

$

70,550.00

 

$

30.00

 

$

846,600.00

 

 

 

 

 

 

 

 

 

December 1, 2009 to February 29, 2012

 

$

79,956.67

 

$

34.00

 

$

959,480.00

 

 

 

 

 

 

 

 

 

March 1, 2012 to New Expiration Date EST 2/28/17

 

$

91,715.00

 

$

39.00

 

$

1,100,580.00

 

 

 

 

 

 

 

 

 

Option Term

 

As determined pursuant to Section 3.03

 

 

EXISTING PREMISES (SUITE 220):

 

 

 

Monthly

 

Annually (Per

 

Annual

 

Period

 

Base Rent

 

Square Foot)

 

Base Rent

 

 

 

 

 

 

 

 

 

December 1, 2004 to November 30, 2009

 

$

18,033.75

 

$

15.00

 

$

216,405.00

 

 

 

 

 

 

 

 

 

December 1, 2009 to February 29, 2012

 

$

27,651.75

 

$

23.00

 

$

331,821.00

 

 

 

 

 

 

 

 

 

March 1, 2012 to New Expiration Date EST 2/28/17

 

$

32,460.75

 

$

27.00

 

$

389,529.00

 

 

 

 

 

 

 

 

 

Option Term

 

As determined pursuant to Section 3.03

 

 

2



 

EXPANSION SPACE (SUITE 230):

 

 

 

Monthly

 

Annually (Per

 

Annual

 

Period

 

Base Rent

 

Square Foot)

 

Base Rent

 

 

 

 

 

 

 

 

 

Expansion Space Commencement

 

$

36,769.33

 

$

23.00

 

$

441,232.00

 

3/1/2007 Date to February 29, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 1,2012 to

 

$

43,164.00

 

$

27.00

 

$

517,968.00

 

New Expiration Date EST 2/28/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Term

 

As determined pursuant to Section 3.03

 

 

2.4      The Term with respect to the Expansion Space shall be coterminous with the Existing Premises. In the event that Tenant exercises its extension options or a termination right under the Original Lease, such extension or termination shall apply to the entire Premises (namely the Existing Premises demised under the Original Lease and the Expansion Space demised pursuant to this First Amendment).

 

2.5      Section 1.08 of the Original Lease is amended by adding the following to the end thereof: “The Expansion Space shall be used for general administrative office functions, research and educational functions.”

 

3.             The construction of the Expansion Improvements and the renovation of the improvements in the Existing Premises shall be governed by the terms of Exhibit “B” of the Original Lease (the “Work Letter”), with the following modifications: (a) the total Construction Allowance with respect to the Expansion Space shall be $479,600.00 in lieu of the amount set forth in the Work Letter, (b) the total Construction Allowance with respect to the Existing Premises shall be $639,705.00 in lieu of the amount set forth in the Work Letter, (c) the term Lease shall mean the Original Lease as amended by this First Amendment, (d) Tenant is accepting the Expansion Space in its “as is” condition and there is no Landlord’s Work, except for Landlord’s Expansion Work, as defined below, (e) the term Landlord’s Work shall mean Landlord’s Expansion Work, as defined below, (f) Tenant’s representatives pursuant to Section 8 of the Work Letter shall be Lynn Day, (g) Landlord’s representative pursuant to Section 8 of the Work Letter shall be Pam Izzo, and (h) Landlord shall have no obligation to disburse any unused portion of the Construction Allowance with respect to the Expansion Space or the Existing Premises under this Section 3 after the second anniversary of the Expansion Space Commencement Date; provided, however, that the foregoing shall not apply to any requests for disbursements of any portion of the Construction Allowance submitted by Tenant prior to such second anniversary date and for which Landlord has not disbursed the portion of the Construction Allowance so requested by such date. Notwithstanding the allocation of the allowance to Expansion Improvements set forth in clause (a) above and to the renovation of the Existing Premises set forth in clause (b) above, the total amount of the two allowances may be expended for work and improvements in either the Expansion Space or the Existing Premises provided that Tenant otherwise complies with

 

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all other terms and conditions of this First Amendment and the Work Letter with respect to such work and improvements.

 

4.             Section 3.02 of the Original Lease shall not apply to the delivery of the Expansion Space; provided, however, during the period from the Effective Date of this First Amendment to the Expansion Space Commencement Date, all obligations and rights of the parties hereunder shall be in effect, except that Tenant’s obligation to pay Base Rent attributable to the Expansion Space, Tenant’s Percentage of Operating Expenses attributable to the Expansion Space and all other charges attributable to the Expansion Space shall not commence until the Expansion Space Commencement Date.

 

5.             Clause (4) of the defined term “Operating Expenses” on page 15 of the Original Lease is amended in its entirety to read as follows: “(4) premiums and other charges incurred by Landlord with respect to fire, earthquake, other casualty, boiler and machinery, theft, rent interruption, liability insurance, any other insurance as is deemed necessary or advisable in the reasonable judgment of Landlord, or any insurance required by the holder of a first mortgage lien on the Real Property, all in such amounts as Landlord determines to be appropriate and the actual costs incurred in repairing an insured casualty to the extent of the deductible amount (not in excess of $25,000.00 per casualty event during the period from December 1, 2004 through November 30, 2009, not in excess of $30,000.00 per casualty event during the period from December 1, 2009 through November 30, 2014, not in excess of $35,000.00 per casualty event during the period from December 1, 2014 through the New Expiration Date, and not in excess of $35,000.00 per casualty event during the Option Terms, if the lease term is extended) under the applicable insurance policy;”.

 

6.             Section 11.26 of the Original Lease is deleted and of no further force or effect.

 

7.             Landlord shall, at Landlord’s sole cost and expense, be responsible for performing the following work in and to the Building and the Expansion Space:

 

(a)              Construction of the demising wall necessary to separate and secure the Expansion Space from the balance of the space on the second floor not leased to Tenant. The demising wall shall be a full-height demising wall running the entire length of the Expansion Space as depicted on “ Exhibit A-1 ” attached hereto. The materials and finish of the demising wall shall be unpainted masonry or unpainted and taped drywall.

 

(b)              Separation of electrical system and installation of a sub-meter for the Expansion Space as reasonably determined by Landlord.

 

(c)              Construction of all code compliance work required to the common areas providing access to the Expansion Space.

 

(d)              Finishing of the common area side of the demising wall and flooring within the common areas providing access to the Expansions Space, with materials and finishes consistent with Building standards.

 

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(The foregoing improvements by Landlord are referred to herein collectively as “Landlord’s Expansion Work.”) Other than Landlord’s Expansion work and except as expressly provided in Sections 8, 9 and 10 of this First Amendment, Tenant shall accept the Expansion Space in its “AS IS” condition. Tenant agrees that, except for Landlord’s Expansion Work and except as expressly provided in Sections 8, 9 and 10 of this First Amendment, Landlord has no obligation and has made no promise to alter, remodel, improve, or repair the Expansion Space, or any part thereof, or to repair, bring into compliance with applicable laws, or improve any condition existing in the Expansion Space as of the Expansion Space Commencement Date. The taking of possession of the Expansion Space by Tenant shall be conclusive evidence that the Expansion Space and the Building were in good and satisfactory condition at the time possession was taken by Tenant. Except as expressly provided in Sections 8, 9 and 10 of this First Amendment, neither Landlord nor Landlord’s agents have made any representations or promises with respect to the condition of the Building, the Expansion Space, the land upon which the Building is constructed, the present or future suitability or fitness of the Expansion Space or the Building for the conduct of Tenant’s particular business, or any other matter or thing affecting or related to the Building or the Expansion Space, and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in this Original Lease. Landlord makes no representation or warranty as to the use of the Expansion Space for laboratory purposes. Any improvements or personal property located in the Expansion Space are delivered without any representation or warranty from Landlord, either express or implied, of any kind, including without limitation, title, merchantability, or suitability for a particular purpose. Tenant shall deliver to Landlord any modifications to Tenant’s insurance required under the Original Lease to reflect the addition of the Expansion Space and Tenant’s entry into the Expansion Space prior to the delivery of possession to Tenant.

 

8.             If any portion of the Expansion Space is in violation of Environmental Laws as of the Expansion Space Delivery Date, Landlord shall perform such remediation work or cause other potentially responsible parties to remediate as and to the extent then required by Environmental Laws. Notwithstanding the foregoing, Landlord shall have the right to contest any alleged violation in good faith, including without limitation the right to apply for and obtain a waiver or deferment of compliance, the right to assert any and all defenses allowed by Environmental Laws, and the right to appeal any decisions, judgments or rulings as may be permitted by Environmental Laws.

 

9.             Landlord represents and warrants that the Expansion Space (including the Expansion Work) will be completed in good and workmanlike manner, in full compliance with all applicable laws, rules, orders, ordinances, directions, regulations and requirements of all governmental agencies, offices, departments, bureaus and boards having jurisdiction to the extent any of the foregoing were in effect on the date of this First Amendment and applicable to the Expansion Space and the Expansion Work (collectively, the “Requirements”); provided that Landlord makes no representation or warranty as to the compliance of any of the foregoing with any Requirements to the extent that the obligation to comply with a Requirement may be triggered in the Expansion Space or any other portion of the Building by reason of any improvements undertaken by Tenant in the Expansion Space or elsewhere in the Premises. If it is determined that the foregoing representation was untrue as of the Expansion Space Delivery Date, Landlord shall not be liable to Tenant for any damages, but Landlord at

 

5



 

no cost to Tenant shall as its sole obligation and Tenant’s sole remedy, rectify the same. Notwithstanding the foregoing, Landlord shall have the right to contest any alleged violation in good faith, including without limitation the right to apply for and obtain a waiver or deferment of compliance, the right to assert any and all defenses allowed by applicable law and the right to appeal any decisions, judgments or rulings to the fullest extent permitted by applicable law. If Tenant does not given Landlord notice of non-compliance with such warranty within one hundred twenty (120) days after the Expansion Space Delivery Date, Landlord shall have no obligation with respect to that warranty.

 

10.          Landlord represents and warrants that, to its actual knowledge, upon the Expansion Space Delivery Date the Building systems, including without limitation plumbing and electrical lines and equipment, heating, ventilation and air conditioning systems (excluding any systems associated with any supplemental cooling for server rooms or other non-building standard cooling or ventilation system), boilers and elevators (collectively, the “Covered Items”) will be in good mechanical and operating condition. If it is determined that the foregoing representation was untrue as of the Expansion Space Delivery Date, Landlord shall not be liable to Tenant for any damages, but Landlord at no cost to Tenant shall as its sole obligation and Tenant’s sole remedy, perform such work, cause the Covered Items to be in good mechanical and operating condition. If Tenant does not given Landlord the notice of non-compliance with such warranty within one hundred twenty (120) days after the Expansion Space Delivery Date, Landlord shall have no obligation with respect to that warranty.

 

11.          The Original Lease expiration date is hereby changed to the date (the “New Expiration Date”) that is the day prior to the date that is ten (10) years after the Expansion Space Commencement Date. All references in the Original Lease to the expiration date or the expiration of the Lease shall be deemed references to the New Expiration Date. The period from the Expansion Space Commencement Date to the New Expiration Date is referred to herein as the “Extension Term.” All references in the Original Lease to the Initial Term shall include the Extension Term. The Options to extend the term of the Lease shall remain unmodified notwithstanding the extension of the Initial Term pursuant to this Paragraph 8. For the sake of clarity, Tenant shall have the right to extend the term as provided in Section 3.03 with the first Option Term, if exercised, commencing from the New Expiration Date.

 

12.          Landlord hereby leases to Tenant, and Tenant hereby hires from Landlord, the personal property listed on Exhibit F-1 hereto, which together with the Existing Furniture shall be defined collectively as the “Included Personal Property.” All references in the Original Lease to the Existing Furniture shall be deleted and replaced with the term Included Personal Property.

 

13.          The following new Articles 12 and 13 are hereby added to the Original Lease:

 

6


 

ARTICLE 12.

TENANT’S RIGHT OF FIRST NOTIFICATION

 

12.1        Landlord shall give Tenant a written notice (the “Availability Notice”) from time to time when Landlord first determines that Other Space (as defined below) will become Available (as defined below). As used herein, “Other Space” means all leasable space in the Building other than the Premises. As used herein, “Available” means that the space (i) is not part of the Premises, (ii) is not then subject to a lease, (iii) is not then subject to any rights of tenant to renew their lease or expand their premises as set forth in their lease and, (iv) was not subject to any negotiations between Landlord and a prospective tenant or an existing tenant prior to the Effective Date of this First Amendment.

 

12.2        Landlord is only obligated to give an Availability Notice once as to any specific Other Space; provided that if Landlord leases any Other Space after Tenant has received an Availability Notice and that space again becomes Available after the expiration of that lease, then Landlord shall again give Tenant an Availability Notice with respect to that Other Space after that space again becomes Available.

 

12.3        Tenant’s rights and Landlord’s obligations under this Article 12 are expressly subject to and conditioned upon there not existing an Event of Default by Tenant under this Lease at the time of delivery of an Availability Notice.

 

12.4        It is understood and agreed that Tenant’s rights under this Article 12 are personal to Tenant and its Permitted Transferees and not transferable except in connection with an assignment or sublease to a Permitted Transferee. In the event of any assignment or subletting of the entire Premises (other than to a Permitted Transferee), this right of first notification shall automatically terminate and shall thereafter be null and void.

 

ARTICLE 13.

TELECOMMUNICATIONS LINES AND EQUIPMENT

 

13.1        Location of Tenant’s Equipment and Landlord Consent:

 

13.1.1     Tenant may install, maintain, replace, remove and use communications or computer wires, cables and related devices (collectively, the “Lines”) at the Building in or serving the Premises only with Landlord’s prior written consent, which consent may not be unreasonably withheld. Tenant shall locate all electronic telecommunications equipment within the Premises and shall coordinate the location of all Lines with Landlord. Any request for consent shall contain such information as Landlord may request.

 

13.1.2     Landlord’s approval of, or requirements concerning, the Lines or any equipment related thereto, the plans, specifications or designs related thereto, the contractor or subcontractor, or the work performed hereunder, shall not be deemed a warranty as to the adequacy or appropriateness thereof, and Landlord hereby disclaims any responsibility or liability for the same.

 

7



 

13.1.3     If Landlord consents to Tenant’s proposal, Tenant shall pay all of Tenant’s and Landlord’s third party costs in connection therewith (including without limitation all costs related to new Lines) and shall use, maintain and operate the Lines and related equipment in accordance with and subject to all laws governing the Lines and equipment and at Tenant’s sole risk and expense. Tenant shall comply with all of the requirements of this Lease concerning alterations in connection with installing the Lines. As soon as the work is completed, Tenant shall submit as-built drawings to Landlord.

 

13.1.4     Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed by Tenant or at Tenant’s request in violation of these provisions, or which are at any time in violation of any laws or present a dangerous or potentially dangerous condition (whether such Lines were installed by Tenant or any other party), within ten (10) days after written notice.

 

13.2        Reallocation of Line Space . Landlord may (but shall not have the obligation to) (a) install and relocate Lines at the Building; and (b) monitor and control the installation, maintenance, replacement and removal of, the allocation and periodic reallocation of available space (if any) for, and the allocation of excess capacity (if any) on, any Lines now or hereafter installed at the Building by Landlord, Tenant or any other party.

 

13.3        Line Problems : Except to the extent arising from the gross negligence or willful misconduct of Landlord or Landlord’s contractors, agents or employees, Landlord shall have no liability for damages arising from, and Landlord does not warrant that the Tenant’s use of any Lines will be free from the following (collectively called “Line Problems”): (a) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, or replacement, use or removal of Lines by or for other tenants or occupants in the Building, by any failure of the environmental conditions or the power supply for the Building to conform to any requirement of the Lines or any associated equipment, or any other problems associated with any Lines by any other cause; (b) any failure of any Lines to satisfy Tenant’s requirements; or (c) any eavesdropping or wiretapping by unauthorized parties. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems.

 

13.4        Electromagnetic Fields : If Tenant at any time uses any equipment that may create an electromagnetic field and/or radio frequency exceeding the normal insulation ratings of ordinary twisted pair riser cable or cause radiation higher than normal background radiation, Landlord reserves the right to require Tenant to appropriately insulate that equipment and the Lines therefor (including without limitation riser cables), and take such other remedial action at Tenant’s sole cost and expense as Lender may require in its sole discretion to prevent such excessive electromagnetic fields, radio frequency or radiation.

 

13.5        Removal of Electrical and Telecommunications Wires .

 

13.5.1     At least thirty (30) days prior to the expiration or within thirty (30) days after the sooner termination of the Lease, as applicable, Landlord shall notify Tenant if Landlord elects to:

 

8



 

(a)           Retain any or all Lines installed by Tenant in the risers of the Building; or

 

(b)           Require Tenant to remove any or all such Lines installed by Tenant and restore the Premises and risers to their condition existing prior to the installation of the Lines (“Wire Restoration Work”). Landlord shall perform such Wire Restoration Work at Tenant’s sole cost and expense.

 

13.5.2     If Landlord elects to have the Lines removed and Tenant fails to do so on or before the expiration of the Lease, Landlord shall have the right within one hundred twenty (120) days after the expiration of the Lease to perform the Wire Restoration Work at Tenant’s sole cost and expense. If Landlord fails to deliver invoices and supporting documentation of its performance of the Wire Restoration Work within such one hundred twenty (120) day period, Landlord shall have waived its right to obtain reimbursement of the cost therefor.

 

13.5.3     In the event Landlord elects to retain the Lines, Tenant covenants that Tenant shall have good right to surrender such Lines, free of all liens and encumbrances, and that all Lines shall be left in their then existing condition, reasonable wear and tear excepted, properly labeled at each end and in each telecommunications/electrical closet and junction box, and in safe condition.

 

13.6        Applicable to Expansion Space Only . The provisions of this Article 13 are applicable only to the Expansion Space (as that term is defined in the First Amendment to this Lease pursuant to which this Article 13 is added to the Lease).

 

14.          Pursuant to the Original Lease, Tenant has the right to 42 parking spaces (the “Current Spaces”). Effective upon the Expansion Space Commencement Date, Tenant shall have the right to an additional 19 parking spaces (the “Additional Spaces”) in the Building’s subterranean garage. Accordingly, effective on the Expansion Space Commencement Date, Section 1.09 of the Original Lease is amended to delete “42 parking spaces” and to insert in place thereof “61 parking spaces.” The rental rates for the Current Spaces shall be $200.00 per month through November 30, 2009. The rental rate for the Additional Spaces shall be the then-current rate charged to other tenants in the Building from time to time. Commencing on December 1, 2009, the monthly rental rate for the Current Spaces shall also be the then-current rate charged to other tenants in the Building from time to time and shall not be subject to any maximum amount. Accordingly, the not-to-exceed rental rates for the Current Spaces as specified in Section 2.03 of the Original Lease for the Initial Term and the Option Term are of no further force or effect.

 

15.          Except as otherwise provided herein, all of the terms and conditions of the Original Lease shall continue to apply during the Extension Term and during the Option Term, to the extent any Options are exercised; provided, however, that there shall be no rent credit, and that there shall be no improvement allowance, Landlord construction obligations or other initial concessions with respect to the Extension Term, except as provided in Paragraphs 3 and 4 of this Agreement.

 

9



 

16.          Landlord hereby represents and warrants to Tenant that it has dealt with no broker, finder or similar person in connection with this First Amendment, and Tenant hereby represents and warrants to Landlord that it has dealt with no broker, finder or similar person in connection with this First Amendment, other than Collier’s International (“Landlord’s Broker”) and CB Richard Ellis, Inc. and USI Real Estate Brokerage Services, Inc. (collectively, “Tenant’s Broker”). Landlord and Tenant shall each defend, indemnify and hold the other harmless with respect to all claims, causes of action, liabilities, losses, costs and expenses (including without limitation attorneys’ fees) arising from a breach of the foregoing representation and warranty. The commission with respect to this First Amendment shall be paid to Landlord’s Broker by Landlord pursuant to a separate agreement. Landlord’s Broker will pay Tenant’s Broker a commission pursuant to a separate agreement. Nothing in this First Amendment shall impose any obligation on Landlord to pay a commission or fee to any party other than Landlord’s Broker.

 

17.          Time is of the essence of this Agreement and the provisions contained herein.

 

18.          As additional consideration for this First Amendment, Tenant hereby certifies that:

 

(a)           The Original Lease (as amended hereby) is in full force and effect.

 

(b)           Tenant is in possession of the Existing Premises.

 

(c)           Base Rent for the Existing Premises has been paid through November 30, 2006.

 

(d)           To Tenant’s knowledge, there are no uncured defaults on the part of Landlord or Tenant under the Original Lease.

 

(e)           All of Landlord’s obligations with respect to performance of Landlord’s Work concerning the Existing Premises and payment of Construction Allowance with respect to Tenant’s Work concerning the Existing Premises have been satisfied, except those provided for in Paragraph 3 of this First Amendment.

 

(f)            To Tenant’s knowledge, there are no existing offsets or defenses which Tenant has against the enforcement of the Original Lease (as amended hereby) by Landlord.

 

(g)           All of the representations and warranties of Tenant in the Original Lease are hereby remade.

 

(h)           Tenant has full right and authority to execute and deliver this First Amendment and each person signing on behalf of Tenant is authorized to do so and no consent of any party is required on behalf of Tenant for this First Amendment to be in full force and effect.

 

10



 

19.          As additional consideration for this First Amendment, Landlord hereby certifies that:

 

(a)              The Original Lease (as amended hereby) is in full force and effect.

 

(b)              To Landlord’s knowledge, there are no uncured defaults on the part of Landlord or Tenant under the Original Lease.

 

(c)              All of Tenant’s obligations with respect to performance of Tenant’s Work concerning the Existing Premises have been satisfied, except those provided for in Paragraph 3 of this First Amendment.

 

(d)              Landlord is the successor in interest to SKS Brannan Associates, LLC and has full right and authority to execute and deliver this First Amendment and each person signing on behalf of Landlord is authorized to do so and no consent of any party is required on behalf of Landlord for this First Amendment to be in full force and effect.

 

(e)              As of the date of this First Amendment, the Building is not encumbered by a mortgage or deed of trust.

 

20.          Except as specifically provided herein, the terms and conditions of the Original Lease as amended hereby are confirmed and continue in full force and effect. This First Amendment shall be binding on the heirs, administrators, successors and assigns (as the case may be) of the parties hereto. This First Amendment and the attached exhibits, which are hereby incorporated into and made a part of this First Amendment, set forth the entire First Amendment between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any free Rent as an inducement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided to Tenant in connection with entering into the Original Lease, unless specifically set forth in this Agreement. Tenant agrees that neither Tenant nor its agents or any other parties acting on behalf of Tenant shall disclose any matters set forth in this Agreement or disseminate or distribute any information concerning the terms, details or conditions hereof to any person, firm or entity without obtaining the express written consent of Landlord. In the case of any inconsistency between the provisions of the Original Lease and this First Amendment, the provisions of this First Amendment shall govern and control. Submission of this First Amendment by Landlord is not an offer to enter into this First Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this First Amendment until Landlord has executed and delivered the same to Tenant.

 

21.          Effective as of the Effective Date hereof, all references to the “Lease” shall refer to the Original Lease, as amended by this First Amendment.

 

11



 

22.          To satisfy compliance with the Employee Retirement Income Security Act of 1974, as amended, Tenant represents and warrants to Landlord and The Prudential Insurance Company of America, a New Jersey corporation (“Prudential”), that:

 

(a)           Tenant is not an “employee benefit plan” (as that term is defined in Section 3(3) of ERISA); and

 

(b)           Tenant is not acquiring the Property as a plan asset subject to ERISA but for Tenant’s own investment account; and

 

(c)           Tenant is not an “affiliate” of Prudential as defined in Section IV(b) or PTE 90-1;

 

(d)           Tenant is not a “party in interest” (as that term is defined in Section 3(14) of ERISA) to the Virginia Retirement System; and

 

(e)           Tenant agrees to keep the identity of the Virginia Retirement System confidential, except to the extent that Tenant may be required to disclose such information as a result of (i) legal process, or (ii) compliance with ERISA or other Laws governing Tenant’s operations.

 

23.          The following new Article 14 is hereby added to the Lease:

 

ARTICLE 14.

TENANT’S ROOFTOP RIGHTS

 

14.1        Right to Install and Maintain Rooftop Equipment . During the Lease Term and subject to the terms of this Article 14, Tenant may install on the roof of the Building telecommunications antennae, microwave dishes or other communication equipment, as necessary for the operation of Tenant’s business within the Premises, including any cabling or wiring necessary to connect this rooftop equipment to the Premises (collectively, the “Rooftop Equipment”). If Tenant wishes to install any Rooftop Equipment, Tenant shall first notify Landlord in writing, which notice shall fully describe the Rooftop Equipment, including, without limitation, its purpose, weight, size and desired location on the roof of the Building and its intended method of connection to the Premises. All of Tenant’s Rooftop Equipment must be located within the area shown as “Available Space for Dish” on the Roof Floor Plan attached hereto as Exhibit RF. Landlord hereby consents to the installation of Rooftop Equipment consisting of one (1) antennae and/or satellite dishes (the “Initial Rooftop Equipment”). If Landlord determines that the Building can structurally accommodate the Rooftop Equipment in addition to the Initial Rooftop Equipment and that the installation, operation and maintenance of the Rooftop Equipment in addition to the Initial Rooftop Equipment will not interfere with other equipment or business operations then installed and operating at the Building (subject to the terms of Section 14.4 below) or any helipad use or emergency access on the roof, Tenant may, at its sole cost and expense, install the Rooftop Equipment in addition to the Initial Rooftop Equipment subject to the terms hereof. Landlord also reserves the right to restrict the number and size of dishes, antennae and other Rooftop Equipment in addition to the Initial Rooftop Equipment installed on the roof of the Building. Landlord further confirms that in determining the amount of rooftop space that is available for

 

12



 

installation of Rooftop Equipment in addition to the Initial Rooftop Equipment, Landlord will consider all factors relevant to the ownership and operation of the Building, including, without limitation, structural capacity, fire-life-safety requirements, applicable laws, rules and regulations and emergency access needs.

 

14.2        Additional Charges for Rooftop Equipment . Tenant will be solely responsible, at Tenant’s sole expense, for the installation, maintenance, repair and removal of the Rooftop Equipment, and Tenant shall at all times maintain the Rooftop Equipment in good condition and repair. Landlord agrees that the named Tenant hereunder shall not pay any rental charge for Tenant’s use of the rooftop pursuant to the terms of this Article 14 for the Initial Rooftop Equipment, provided, however, if any successor to the named Tenant wishes to utilize rooftop space or if Tenant seeks to use rooftop space for Rooftop Equipment in addition to the Initial Rooftop Equipment, Landlord reserves the right to impose a charge for such use, which shall be consistent with market rates.

 

14.3        Conditions of Installation . Tenant shall comply with all applicable laws, rules and regulations relating to the installation, maintenance and operation of Rooftop Equipment at the Building (including, without limitation, all construction rules and regulations) and will pay all costs and expenses relating to such Rooftop Equipment, including the cost of obtaining and maintaining any necessary permits or approvals for the installation, operation and maintenance thereof in compliance with applicable laws, rules and regulations. The installation, operation and maintenance of the Rooftop Equipment at the Building shall not adversely affect the structure or operating systems of the Building or the business operations of any other tenant or occupant at the Building. Tenant may install cabling and wiring through the Building interior conduits, risers, and pathways of the Building in accordance with Article 13 in order to connect Rooftop Equipment with the Premises.

 

14.4        Non-Exclusive Right . Tenant’s right to install and maintain Rooftop Equipment is non-exclusive and is subject to termination or revocation as set forth herein, including pursuant to Section 9.02 of this Lease. Subject to the terms set forth below in this Section 14.4, Landlord at its election may require the relocation, reconfiguration or removal of the Rooftop Equipment, if in Landlord’s reasonable judgment the Rooftop Equipment is interfering with the use of the rooftop for the helipad or other Building operations or the business operations of other tenants or occupants of the Building, causing damage to the Building or if Tenant otherwise fails to comply with the terms of this Article 14. If relocation or reconfiguration becomes necessary due to interference difficulties, Landlord and Tenant will reasonably cooperate in good faith to agree upon an alternative location or configuration that will permit the operation of the Rooftop Equipment for Tenant’s business at the Premises without interfering with other operations at the Building or communications uses of other tenants or occupants. If removal is required due to any breach or default by Tenant under the terms of this Article 14, Tenant shall remove the Rooftop Equipment upon thirty (30) days’ written notice from Landlord. Any relocation, removal or reconfiguration of the Rooftop Equipment as provided above shall be at Tenant’s sole cost and expense. In addition to the other rights of relocation and removal as set forth herein, Landlord reserves the right to require relocation of Tenant’s Rooftop Equipment at any time at its election at Landlord’s cost (but not more frequently than once per year) so long as Tenant is able to continue operating its Rooftop Equipment in substantially the same manner as it was operated prior to its relocation.

 

13



 

In connection with any relocation of Tenant’s Rooftop Equipment at the request of or required by Landlord (other than in the case of a default by Tenant hereunder), Landlord shall provide Tenant with at least thirty (30) days’ prior written notice of the required relocation and will conduct the relocation in a commercially reasonable manner and in such a way that will, to the extent reasonably possible, prevent interference with the normal operation of Tenant’s Rooftop Equipment. In connection with any relocation, Landlord further agrees to work with Tenant in good faith to relocate Tenant’s Rooftop Equipment to a location that will permit its normal operation for Tenant’s business operations. Landlord acknowledges that relocation of Tenant’s Rooftop Equipment may be disruptive to Tenant’s business and, without limiting its rights to require such removal, confirms that it will not exercise its rights hereunder in a bad faith manner or for the purpose of harassing or causing a hardship to Tenant.

 

14.5        Costs and Expenses . If Tenant fails to comply with the terms of this Article 14 within thirty (30) days following written notice by Landlord (or such longer period as may be reasonably required to comply so long as Tenant is diligently attempting to comply), Landlord may take such action as may be necessary to comply with these requirements. In such event, Tenant agrees to reimburse Landlord for all costs incurred by Landlord to effect any such maintenance, removal or other compliance subject to the terms of this Article 14, including interest on all such amounts incurred at the Interest Rate, accruing from the date which is ten (10) days after the date of Landlord’s demand until the date paid in full by Tenant, with all such amounts being Additional Rent under this Lease.

 

14.6        Indemnification; Removal . Tenant agrees to indemnify Landlord, its partners, agents, officers, directors, employees and representatives from and against any and all liability, expense, loss or damage of any kind or nature from any suits, claims or demands, including reasonable attorneys’ fees, arising out of Tenant’s installation, operation, maintenance, repair, relocation or removal of the Rooftop Equipment, except to the extent any such liability, expense, loss or damage results from the gross negligence or intentional misconduct of Landlord or its agents, partners, officers, directors, employees, contractors or representatives. At the expiration or earlier termination of the Lease, Tenant may and, upon request by Landlord, shall remove all of the Rooftop Equipment, including any wiring or cabling relating thereto, at Tenant’s sole cost and expense and will repair at Tenant’s cost any damage resulting from such removal. If Landlord does not require such removal, any Rooftop Equipment remaining at the Building after the expiration or earlier termination of this Lease which is not removed by Tenant shall be deemed abandoned and shall become the property of Landlord.

 

14.7        Roof Access; Rules and Regulations . Subject to compliance with the construction rules for the Building and Landlord’s reasonable and nondiscriminatory rules and regulations regarding access to the roof and, upon receipt of Landlord’s prior written consent to such activity (which shall not be unreasonably withheld, conditioned or delayed), Tenant and its representatives shall have access to and the right to go upon the roof of the Building, on a seven (7) day per week, twenty-four (24) hour basis, to exercise its rights and perform its obligations under this Article 14. Tenant acknowledges that, except in the case of an emergency or when a Building engineer is not made available to Tenant in sufficient time to allow Tenant to avoid or minimize interruption of use of the Rooftop Equipment, advance notice is required and a Building engineer must accompany all persons gaining access to the

 

14



 

rooftop. Tenant may install Rooftop Equipment at the Building only in connection with its business operations at the Premises, and may not lease or license any rights or equipment to third parties or allow the use of any rooftop equipment by any party other than Tenant. Tenant acknowledges that Landlord has made no representation or warranty as to Tenant’s ability to operate Rooftop Equipment at the Building and Tenant acknowledges that helicopters, other equipment installations and other structures and activities at or around the Building may result in interference with Tenant’s Rooftop Equipment. Except as set forth in this Article 14, Landlord shall have no obligation to prevent, minimize or in any way limit or control any existing or future interference with Tenant’s Rooftop Equipment.

 

24.           Upon establishment of the Expansion Space Commencement Date, the parties shall execute a confirmation memorandum in form similar to that attached as Exhibit C to the Original Lease.

 

IN WITNESS WHEREOF, this First Amendment was executed as of the date first above written.

 

 

Landlord:

 

 

 

PRU/SKS BRANNAN ASSOCIATES, LLC,
a Delaware limited liability company

 

 

 

By:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA\ Its: Managing Member

 

 

 

 

 

 

 

 

By:

/s/ Jolynn Chow Miller

 

 

 

 

 

 

 

Jolynn Chow Miller Director Second Vice President

 

 

 

[Printed Name and Title]

 

15



 

 

Tenant:

 

 

 

CALIFORNIA PACIFIC MEDICAL CENTER, a California nonprofit public benefit corporation

 

 

 

 

 

By:

/s/ Jack C. Bailey

 

 

 

 

 

Jack C. Bailey, EVP, DEC 2006

 

 

[Printed Name and Title]

 

 

 

 

 

 

 

By:

/s/ Maura F. Lane

 

 

 

 

 

Maura F. Lane, Asst. Secty. 12/1/2006

 

 

[Printed Name and Title]

 

 

 

 

If Tenant is a corporation, this instrument must be executed by the chairman of the board, the president or any vice president and the secretary, any assistant secretary, the chief financial officer or any assistant financial officer or any assistant treasurer of such corporation, unless the bylaws or a resolution of the board of directors shall otherwise provide, in which case the bylaws or a certified copy of the resolution, as the case may be, must be attached to this instrument.

 

16


 

EXHIBIT A-1

 

EXPANSION SPACE

 

 

(See Attached.)

 

1



 

EXHIBIT F-1

 

PERSONAL PROPERTY

 

Cubicles

 

29

 

 

 

Filing Cabinets

 

25

 

 

 

Desks

 

6

 

 

 

Purple chairs for conference

 

20

 

 

 

Padded filing cabinets

 

30

 

 

 

Tall filing cabinets

 

4

 

 

 

Black conference chairs

 

9

 

 

 

Curved cubicle tables

 

18

 

 

 

Tall black closet cabinets

 

2

 

 

 

Tables:

 

 

3 x 3 square

 

2

12 x 3

 

1

6 x 3

 

2

 

 

 

Refrigerator:

 

1

 

 

 

Microwave:

 

1

 

 

 

Soft seating:

 

 

Side chairs

 

2

Sofa

 

1

Blue leather

 

2

Side tables

 

2

 

1



 

EXHIBIT RF

 

ROOF FLOOR PLAN

 

 

(See Attached.)

 

1



 

Roof Floor

 

 

1.             EGM communication dish

2.             Zone Labs Dish Network

3.             Carat Dish Network

4.             Carast ISP dish

 

1


 

EXhibit B

 

DEPICTION OF THE SUBLEASED PREMISES

 

                Suite 130:

 

 



 

                Suite 230:

 

 



 

                Suite 230 (continued):

 

 



 

MASTER LESSOR’S CONSENT

 

SKS Brannan Associates, LLC, a Delaware limited liability company (“ Original Lessor ”), as lessor, and Sutter West Bay Hospitals, a California nonprofit public benefit corporation dba California Pacific Medical Center (“ Sublessor ”), formerly known as California Pacific Medical Center, a California nonprofit public benefit corporation, as lessee, entered into that certain standard form office lease dated February 13, 2004 (the “ Lease ”), for those certain premises consisting of Forty-Two Thousand Six Hundred Forty-Seven (42,647) rentable square feet located at 475 Brannan Street, Suites 120, 130 and 220, San Francisco, California (the “ Original Leased Premises ”) for the Initial Term expiring on November 30, 2009. PRU/SKS Brannan Associates, LLC, a Delaware limited liability company (“ PRU/SKS ”), succeeded to the interest of Original Lessor. PRU/SKS and Sublessor entered into that certain first amendment to lease dated November 29, 2006 (the “ First Amendment ”), whereby, among other things, the Original Leased Premises were expanded to include the Expansion Space consisting of Nineteen Thousand One Hundred Eighty-Four (19,184) rentable square feet in the Building, including Suite 230 (the Original Leased Premises and Expansion Premises are referred to collectively as the “ Master Leased Premises ”), and the Term of the Lease was extended through February 28, 2017. CLPF — 475 Brannan Street, L.P., a Delaware limited partnership (“ Master Lessor ”), succeeded to the interest of PRU/SKS. The Lease and First Amendment are referred to collectively as the “ Master Lease ”. Invitae Corporation, Delaware corporation (“ Sublessee ”), desires to sublease a portion of the Master Leased Premises commonly known as Suites 130 and 230 consisting of a total of Eight Thousand Eight Hundred Fifty-Two (8,852) rentable square feet (the “ Subleased Premises ”) from Sublessor and Sublessor is willing to sublease the Subleased Premises to Sublessee pursuant to the terms and provisions of that certain sublease dated December 6, 2013 (the “ Sublease ”).

 

Master Lessor hereby consents to Sublessor’s sublease of the Subleased Premises to Sublessee pursuant to the Sublease. This consent by Master Lessor shall not relieve Sublessor from the further performance of any of the terms and conditions of the Master Lease. Except as expressly set forth in the Sublease, nothing herein or in the Sublease shall be deemed to modify the Master Lease or constitute a waiver of any of Master Lessor’s rights under (or any of the provisions of) the Master Lease.

 

 

 

MASTER LESSOR:

 

 

 

CLPF – 475 BRANNAN STREET, L.P., a

 

Delaware limited partnership

 

 

 

 

 

By:

[ILLEGIBLE]

 

Its:

Authorized Signatory

 




Exhibit 10.14

 

LEASE

 

 

278 UNIVERSITY INVESTORS, LLC,

a California limited liability company

 

as Landlord,

 

 

and

 

 

INVITAE CORPORATION ,

a Delaware corporation,

 

as Tenant

 



 

SUMMARY OF BASIC LEASE INFORMATION

 

This Summary of Basic Lease Information (“ Summary ”) is hereby incorporated into and made a part of the attached Lease. Each reference in the Lease to any term of this Summary shall have the meaning as set forth in this Summary for such term. In the event of a conflict between the terms of this Summary and the Lease, the terms of the Lease shall prevail. Any capitalized terms used herein and not otherwise defined herein shall have the meaning as set forth in the Lease.

 

TERMS OF LEASE

 

1.

Date:

OCT 31, 2012

 

 

 

2.

Landlord:

278 UNIVERSITY INVESTORS, LLC,

 

 

a California limited liability company

 

 

 

3.

Address of Landlord (Section 26.19) :

278 UNIVERSITY INVESTORS, LLC

 

 

c/o Ventana Property Services

 

 

975 High St.

 

 

Palo Alto, CA 94301

 

 

Attn: Joseph F. Martignetti, Jr.

 

 

 

4.

Tenant:

INVITAE CORPORATION,

 

 

a Delaware corporation

 

 

 

5.

Address of Tenant (Section 26.19) :

Prior to Rent Commencement Date:

 

 

 

 

 

INVITAE CORPORATION

 

 

458 Brannan St.

 

 

San Francisco, CA 94107

 

 

Attention: Richard Tompane

 

 

 

 

 

From and After Rent Commencement Date:

 

 

 

 

 

INVITAE CORPORATION

 

 

The Premises

 

 

Attention: Richard Tompane

 

 

 

6.

Premises ( Article 1 ):

 

 

1



 

TERMS OF LEASE

 

 

6.1

Premises:

Approximately eight thousand three hundred forty eight (8,348) rentable square as determined by Landlord’s method of measurement (which has been explained to Tenant) and, for purposes of this Lease, agreed to contain such number of square feet. The Premises is located on the first and second floor of the Building (as defined below) and consists of (i) six thousand four hundred ninety nine (6,499) rentable square feet located on the second floors of the Building and commonly known as Suite 200, as described more particularly in Exhibit A-1 attached hereto (collectively, the “ Second Floor Premises ”), and (it) one thousand eight hundred forty nine (1,849) rentable square feet located on the first floor of the Building and commonly known as Suite 120, as described more particularly in Exhibit A-2 attached hereto (collectively, the “ First Floor Premises ”). The Building and the Premises are not subject to re-measurement unless, pursuant to a written amendment to this Lease signed by both Landlord and Tenant, space is subtracted therefrom or additional space is added thereto. Recognizing that both Landlord and Tenant have agreed to the foregoing rentable square footage number and have agreed that there will be no re-measurement except as expressly provided above, Landlord has given Tenant the opportunity to measure the Building and the Premises and has encouraged Tenant to do so, and Tenant hereby confirms that it has elected, in its sole discretion and without reliance on any representation by Landlord or its agents or any brokers, not to measure the Building or the Premises.

 

 

 

 

 

6.2

Building:

The building to be constructed pursuant to this Lease which is to be located at 278 University Avenue, Palo Alto, California, together with any alterations, modifications, replacements or renovations thereto following the mutual execution and delivery of this Lease

 

 

 

 

7.

Term (Article 2) :

 

 

 

 

 

 

7.1

Lease Term:

Approximately seven (7) years, unless sooner terminated or extended in accordance with the provisions of this Lease.

 

2



 

TERMS OF LEASE

 

 

7.2

Lease Commencement Date:

The date that Landlord delivers the Premises to Tenant in a condition enabling Tenant to commence its Tenant Improvements (as defined in Exhibit B attached hereto), as reasonably determined by Landlord. The Lease Commencement Date is anticipated to be November 1, 2012 (the “ Anticipated Lease Commencement Date ”).

 

 

 

 

 

7.3

Rent Commencement Date;

The date that is one hundred five (105) days following the Lease Commencement Date; provided that, in the event Tenant first conducts business in the Premises prior to said date, the Rent Commencement Date shall be the date Tenant first conducts business in the Premises.

 

 

 

 

 

7.4

Lease Expiration Date:

The last day of the month in which the seventh (7 th ) anniversary of the Rent Commencement Date occurs.

 

 

 

 

 

7.5

Option to Extend:

One (1) extension term of seven (7) years

 

 

 

 

8.

Base Rent (Article 3) :

 

 

 

 

Monthly

 

 

 

Installment

 

Months

 

of Base Rent

 

 

 

 

 

 

Rent Commencement Date -12 th  full calendar month of Term

 

$

55,514.20

 

Months 13-24

 

$

57,179.63

 

Months 25-36

 

$

58,895.01

 

Months 37-48

 

$

60,661.87

 

Months 49-60

 

$

62,481.72

 

Months 61-72

 

$

64,356.17

 

Months 73- Lease Expiration Date

 

$

66,286.86

 

 

9.

Additional Rent (Article 4) :

 

 

 

 

 

 

9.1

Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Costs:

 

 

 

40.76

%

 

 

 

 

 

 

 

10.

Security Deposit (Article 20) :

$

992,807.68

 

 

 

 

 

11.

Parking ( Article 24 ):

None.

 

 

 

 

12.

Brokers ( Section 26.25 ):

Cornish & Carey Newmark Knight Frank representing Landlord and Cresa representing Tenant

 

 

 

 

13.

Guarantor(s) ( Section 26.32 ):

None

 

3



 

LEASE

 

This Lease, which includes the preceding Summary and the exhibits attached hereto and incorporated herein by this reference, dated as of the date set forth in Section 1 of the Summary, is made by and between 278 UNIVERSITY INVESTORS, LLC, a California limited liability company (“ Landlord ”), and INVITAE CORPORATION, a Delaware corporation (“ Tenant ”).

 

ARTICLE 1

 

REAL PROPERTY, BUILDING AND PREMISES

 

1.1          Real Property, Building and Premises.

 

1.1.1        Premises and Real Property . Upon and subject to the terms, covenants and conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 6.1 of the Summary (the “ Premises ”), which Premises are located in the Building defined in Section 6.2 of the Summary (the “ Building ”). The outline of the floor plan of the Premises is set forth in Exhibit A-1 and Exhibit A-2 attached hereto. The Building, any outside plaza areas, land and other improvements surrounding the Building which are designated from time to time by Landlord as common areas appurtenant to or servicing the Building, and the land upon which any of the foregoing are situated, are herein sometimes collectively referred to as the “ Real Property ”.

 

1.1.2       Tenant’s and Landlord’s Rights . Tenant is hereby granted the right to the nonexclusive use of the common corridors and hallways, stairwells, elevators, restrooms and other public or common areas located in the Building or on the Real Property that are designated by Landlord from time to time as common areas for the Building (collectively, the “ Common Areas ”) for the purposes for which they were designed and intended and for no other purposes whatsoever; provided, however, that (i) Tenant’s use thereof shall be subject to (A) the provisions of any covenants, conditions and restrictions regarding the use thereof now or hereafter recorded against the Real Property, and (B) the rules and regulations set forth in Exhibit D attached hereto, and such reasonable, nondiscriminatory revisions to such rules and regulations not inconsistent with the terms and provisions of this Lease, as Landlord may make from time to time (which shall be provided in writing to Tenant), and (ii) subject to Article 25 below, Tenant may not go on the roof of Building without Landlord’s prior consent (which may be withheld in Landlord’s sole and absolute discretion) and without otherwise being accompanied by a representative of Landlord, Landlord reserves the right from time to time to use any of the Common Areas of the Building, and the roof, risers and conduits of the Building for telecommunications and/or any other purposes, and to do any of the following: (1) make any changes, additions, improvements, repairs and/or replacements in or to the Real Property or any portion or elements thereof, including, without limitation, (x) changes in the location, size, shape and number of driveways, entrances, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways, public and private streets, plazas, courtyards, transportation facilitation areas and Common Areas, and (y) expanding or decreasing the size of the Real Property and the Building and any Common Areas and other elements thereof, thereon and therefrom; (2) close temporarily any of the Common Areas while engaged in making repairs, improvements or alterations to the Building; and (3) perform such other acts and make such other changes with respect to the Building as Landlord may, in the exercise of good faith business judgment, deem to be appropriate. Landlord reserves the right from time to time to grant, without the consent or joinder of Tenant, such easements, rights of way and dedications that Landlord deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights of way and dedications do not unreasonably interfere with the use of the Premises by Tenant or Tenant’s access to the Premises, and do not increase Tenant’s obligations hereunder. Tenant agrees to execute any documents reasonably requested by Landlord to effectuate any such easement rights, dedications, maps or restrictions.

 

1.2          Condition of Premises . Tenant acknowledges that, as of the date of this Lease, the Building has not yet been constructed and the Landlord Work has not been completed. Landlord warrants that (i) the Landlord Work shall be Substantially Completed in accordance with the Final Warm Shell Plans (as defined in Exhibit B attached hereto), as modified by any Change Orders (as defined in Exhibit B attached hereto) approved in writing by Landlord and Tenant pursuant to the express provisions of Exhibit B , subject only to items described in the Punch List, (ii) upon Substantial Completion of the Landlord Work, the then existing electrical, plumbing, lighting, and

 

4



 

heating, ventilating and air conditioning systems are in good working condition and repair subject to maintenance, repairs or replacement required by the negligence, misuse or misconduct of Tenant or alterations or improvements made by Tenant and (iii) upon Substantial Completion of the Landlord Work, all interior and exterior elements of the Building for which Landlord is responsible as part of the Landlord Work shall be constructed in compliance with all Laws (as defined below) (specifically including, without limitation, accessibility Laws) applicable thereto for general office use (as opposed to any specific use intended by Tenant) to the extent such Laws were applicable to the Landlord Work at the time of construction. The warranty described in the foregoing sentence shall commence upon Substantial Completion of the Landlord Work and shall continue for a period of one hundred twenty (120) days thereafter (the “ Warranty Period ”), In the event that Tenant discovers a breach of the warranties expressly described in this Section 1.2 , Tenant shall promptly notify Landlord of such noncompliance. In the event Tenant notifies Landlord of any noncompliance with said warranties during the Warranty Period and as Tenant’s sole and exclusive remedy for a breach of said warranties, Landlord shall promptly undertake to complete any required repairs or replacements identified in Tenant’s notice and such repairs or replacements shall be expeditiously completed at Landlord’s sole cost and expense, without reimbursement by Tenant. Except as otherwise expressly set forth in this Section 1.2 and for such contractor warranties assigned by Landlord to Tenant as set forth in Exhibit B hereunder, Landlord makes no warranties with regard to the condition of the Premises or the Building and Landlord shall not be obligated to provide or pay for any improvement, remodeling or refurbishment work or services related to the improvement, remodeling or refurbishment of the Premises, and Tenant shall accept the Premises in its “ AS IS ” condition on the Lease Commencement Date. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD HEREBY DISCLAIMS, AND TENANT WAIVES THE BENEFIT OF, ANY AND ALL IMPLIED WARRANTEES, INCLUDING IMPLIED WARRANTIES OF HABIT ABILITY AND FITNESS OR SUITABILITY FOR A PARTICULAR PURPOSE.

 

1.3          Rentable Square Feet . The parties hereby stipulate that the Premises contain the rentable square feet set forth in Section 6.1 of the Summary, and such square footage amount is not subject to adjustment or remeasurement by Landlord or Tenant. Accordingly, there shall be no adjustment in the Base Rent or other amounts set forth in this Lease which are determined based upon rentable or usable square feet of the Premises and Tenant hereby waives any and all claims at law or in equity based on the determination of rentable square feet set forth in Section 6.1 of the Summary.

 

ARTICLE 2

 

LEASE TERM

 

2.1          Initial Lease Term . The terms and provisions of this Lease shall be effective as of the date of this Lease except for the provisions of this Lease relating to the payment of Rent. The term of this Lease (the “ Lease Term ”) shall be as set forth in Section 7.1 of the Summary and shall commence on Lease Commencement Date described in Section 7.2 of the Summary and shall terminate on the Lease Expiration Date set forth in Section 7.4 of the Summary, unless this Lease is sooner terminated or extended as hereinafter provided. If Landlord does not deliver possession of the Premises to Tenant on or before the Anticipated Lease Commencement Date (as set forth in Section 7.2 of the Summary) or any other date, Landlord shall not be subject to any liability nor shall the validity of this Lease nor the obligations of Tenant hereunder be affected. Notwithstanding the foregoing provisions of this Section 2.1 or anything else in this Lease to the contrary, if the Lease Commencement Date does not occur prior to April 1,2013 for any reason other than delays caused by Tenant, Tenant shall have the right, as Tenant’s sole and exclusive remedy for a delivery failure, to terminate this Lease by written notice to Landlord delivered prior to the Lease Commencement Date and upon such termination all sums previously deposited with Landlord shall be refunded to Tenant and thereafter the parties shall have no further rights or obligations hereunder (except to the extent otherwise expressly set forth herein). Within a reasonable period of time after the date Tenant takes possession of the Premises Landlord shall deliver to Tenant a Commencement Date Memorandum in the form attached hereto as Exhibit C , attached hereto, setting forth the Lease Commencement Date, the Rent Commencement Date and the Lease Expiration Date, and Tenant shall execute and return such amendment to Landlord within ten (10) days after Tenant’s receipt thereof. If Tenant fails to execute and return the amendment within such 10-day period, Tenant shall be deemed to have approved and confirmed the dates set forth therein, provided that such deemed approval shall not relieve Tenant of its obligation to execute and return the amendment.

 

5



 

2.2          Options to Extend . Provided the Lease is in full force and effect and no Event of Default is outstanding at the time of notification or commencement, Tenant shall have the option to extend the Term of this Lease as set forth in Section 7.5 of the Summary, on the same terms and conditions set forth in the Lease, except as modified by the terms, covenants and conditions as set forth herein. The extension right described herein is personal to INVITAE CORPORATION, a Delaware corporation and its Permitted Transferees (as defined below), and shall not otherwise be assigned or transferred and may only be exercised if Tenant is then in possession of the entire Premises If Tenant elects to exercise said option, then Tenant shall provide Landlord with written notice of such election not more than fifteen (15) months or less than nine (9) months prior to the then existing Lease Expiration Date, time being of the essence. If Tenant fails to timely provide such notice, Tenant shall have no further or additional right to extend or renew the term of the Lease. Any extension of the Term shall be upon all the terms and conditions set forth in this Lease, except that: (i) Landlord shall not be obligated to perform any remodeling, renovation, alteration or improvement work in the Premises; (ii) Landlord shall not be obligated to pay any commission to any broker with regard to extension of the Term; (iii) Base Rent for the extension term shall be at Fair Market Rental (as defined below) for the Premises.

 

2.2.1.      For the extension period, the Rent in effect at the expiration of the then current term of the Lease shall be adjusted to reflect the then current Fair Market Rental. “ Fair Market Rental ” shall mean the monthly amount, projected during the relevant period of time, that a willing, comparable non-equity tenant (excluding sublease and assignment transactions) would pay, and a willing comparable landlord of a comparable quality office building located in the Downtown Palo Alto rental market would accept, at arm’s length, to renew a lease for space of comparable size, quality, ceiling height, loading capabilities and power capacities as the Premises, taking into account the age, quality and layout of the Premises and also taking into account the provisions of this Lease and other items that professional real estate brokers customarily consider in calculating renewal rents such as current rental rates, escalation clauses, operating expense pass-through charges, rent abatement provisions (if any), tenant improvement allowances (if any), tenant size and creditworthiness and other factors typically considered by landlords of such similar facilities in the Downtown Palo Alto rental market. Notwithstanding the foregoing, in no event shall the Fair Market Rental for the option period be less than the highest per square foot Base Rent during the preceding period of the Lease Term.

 

2.2.2.      Landlord and Tenant shall endeavor to agree upon the Fair Market Rental. If they are unable to so agree within thirty (30) days after receipt by Landlord of Tenant’s notice of exercise of an option, Landlord and Tenant shall mutually select a licensed real estate broker who is active in the leasing of similar buildings in the Downtown Palo Alto rental market. If Landlord and Tenant are unable to agree on a broker within fifteen (15) days following the expiration of said thirty (30) day period, the parties shall jointly petition the Superior Court of San Mateo County to appoint a neutral broker similarly qualified. Landlord shall submit Landlord’s determination of Fair Market Rental and Tenant shall submit Tenant’s determination of Fair Market Rental to such broker, at such time or times and in such manner as Landlord and Tenant shall agree (or as directed by the broker if Landlord and Tenant do not promptly agree). The broker shall select either Landlord’s or Tenant’s determination as the Fair Market Rental, and such determination shall be binding on Landlord and Tenant. If Tenant’s determination is selected as the Fair Market Rental, then Landlord shall bear all of the broker’s cost and fees. If Landlord’s determination is selected as the Fair Market Rental, then Tenant shall bear all of the broker’s cost and fees.

 

2.2.3.      In the event the Fair Market Rental for the option period has not been determined at such time as Tenant is obligated to pay Base Rent for said period, Tenant shall pay as Base Rent pending such determination, the Base Rent in effect for such space immediately prior to the option period; provided, that upon the determination of the applicable Fair Market Rental, any shortage of Base Rent paid, together with interest at the rate specified in the Lease, shall be paid to Landlord by Tenant.

 

ARTICLE 3

 

BASE RENT

 

Commencing on the Rent Commencement Date, Tenant shall pay, without notice or demand, to Landlord or Landlord’s agent at the management office for the Building, or at such other place as Landlord may from time to time designate in writing, in cash or other immediately available good funds, base rent (“Base Rent”) as set forth in

 

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Section 8 of the Summary, payable in equal monthly installments as set forth in Section 8 of the Summary in advance on or before the first day of each and every month during the Lease Term, without any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term in which Base Rent is payable hereunder, along with Landlord’s estimate of Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Costs for the first full month of the Lease Term, shall be paid at the time of Tenant’s execution of this Lease and shall be applied to Rent first due hereunder. If any rental payment date (including the Rent Commencement Date) falls on a day of the month other than the first day of such month or if any rental payment is for a period which is shorter than one month, then the rental for any such fractional month shall be a proportionate amount of a full calendar month’s rental based on the proportion that the number of days in such fractional month bears to the number of days in the calendar month during which such fractional month occurs. All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis. Upon any Event of Default, Landlord shall be entitled to recover from Tenant the then unamortized portion of any Base Rent abated pursuant to Section 8 of the Summary.

 

ARTICLE 4

 

ADDITIONAL RENT

 

4.1          Additional Rent . Commencing on the Rent Commencement Date, in addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay as additional rent the sum of the following: (i) Tenant’s Share (as such term is defined below) of the annual Operating Expenses; plus (ii) Tenant’s Share of the annual Tax Expenses; plus (iii) Tenant’s Share of the annual Utilities Costs. Such additional rent, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease (including, without limitation, pursuant to Article 6 ), shall be hereinafter collectively referred to as the “ Additional Rent .” The Base Rent and Additional Rent are herein collectively referred to as the “ Rent .” All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner, time and place as the Base Rent. Without limitation on other obligations of Tenant which shall survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 , to the extent allocable to the Lease Term, shall survive the expiration of the Lease Term.

 

4.2          Definitions . As used in this Article 4 , the following terms shall have the meanings hereinafter set forth:

 

4.2.1       “ Operating Expenses ” shall mean all expenses, costs and amounts of every kind and nature which Landlord shall pay because of or in connection with the ownership, management, maintenance, repair, replacement, restoration or operation of the Building and the Real Property, including, without limitation, any amounts paid for: (i) the cost of operating, maintaining, repairing, renovating and managing the utility systems, mechanical systems, sanitary and storm drainage systems, any elevator systems and all other “Systems and Equipment” (as defined in Section 4.2.2 of this Lease), and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections, and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with implementation and of a transportation system management program or similar program; (iii) the cost of insurance carried by Landlord, in such amounts as Landlord may reasonably determine or as may be required by any mortgagees or the lessor of any underlying or ground lease affecting the Building; (iv) the cost of landscaping, relamping, supplies, tools, equipment and materials, and all fees, charges and other costs (including consulting fees, legal fees and accounting fees) incurred in connection with the management, operation, repair and maintenance of the Building (provided however property management fees shall be commercially reasonable and shall in no event exceed five percent (5,0%) of gross Building revenue); (v) any equipment rental agreements or management agreements (including the cost of any management fee and the fair rental value of any office space provided thereunder); (vi) wages, salaries and other compensation and benefits of all persons engaged in the operation, management, maintenance or security of the Building, and employer’s Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits; (vii) payments under any easement, license, operating agreement, declaration, restrictive covenant, underlying or ground lease (excluding rent), or instrument pertaining to the sharing of costs by the Building; (viii) the cost of janitorial service, alarm and security service, if any, window cleaning, trash removal, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common

 

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or public areas or facilities, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (ix) amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Building; (x) earthquake insurance premiums and deductibles; and (xi) the cost of any improvements, repairs, replacements or other costs (I) which are intended as a labor-saving device or to effect other economies in the operation or maintenance of the Building, (II) made to the Building or the Real Property or any portion thereof after the Lease Commencement Date that are required under any governmental law or regulation, or (III) which are reasonably determined by Landlord to be in the best interests of the Building or the Real Property (excluding, however, the addition of rentable square footage to the Building); provided, however, that if any such cost described in (I), (II) or (III) above, is a capital expenditure, such cost shall be amortized (including interest on the unamortized cost at a rate reasonably determined by Landlord but which rate shall in no event be less than Landlord’s actual cost of funds) over its useful life as Landlord shall reasonably determine. If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant. If the Building is less than one hundred percent (100%) occupied, Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such year or applicable portion thereof, employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been paid had the Building been one hundred percent (100%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year, or applicable portion thereof.

 

Operating Expenses shall not include any of the following: (a) leasing commissions; (b) the cost of improvements installed for the exclusive use of other tenants or occupants of the Building; (c) wages, salaries, fees and fringe benefits paid to employees or officers of Landlord above the level of property manager; (d) costs for which Landlord has received actual reimbursement from others (other than through Operating Expenses); (e) costs to correct any construction or design defects in the Building or to construct capital improvements to comply with any private restrictions, underwriter’s requirement or Law that were applicable to the Building on the Lease Commencement Date; (f) costs of attorneys’ fees and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of the Building; (g) costs of interest on debt or amortization on any mortgages, and rent payable under any ground lease of the Building; (h) costs of special services provided solely to an individual tenant of the Building other than Tenant; (i) costs which are generally treated as a capital expenditure, except to the extent expressly authorized in subsection 4.2.1 (xi) above; (j) Utilities Costs; (k)Tax Expenses; or (1) costs due to Landlord’s active gross negligence or willful misconduct or costs for which landlord has been actually reimbursed through insurance.

 

4.2.2       “ Systems and Equipment ” shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment which serve the Building in whole or in part.

 

4.2.3       “ Tax Expenses ” shall mean all federal, state, county, or local governmental or municipal taxes, fees, assessments, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit assessments, fees and taxes, child care subsidies, fees and/or assessments, job training subsidies, fees and/or assessments, open space fees and/or assessments, housing subsidies and/or housing fund fees or assessments, public art fees and/or assessments, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Building), which Landlord shall pay because of or in connection with the ownership, leasing and operation of the Building or Landlord’s interest therein. For purposes of this Lease, Tax Expenses shall be calculated as if (i) the tenant improvements in the Building were fully constructed, and (ii) the Building and all tenant improvements therein were fully assessed for real estate tax purposes.

 

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4.2.3.1     Tax Expenses shall include, without limitation:

 

(i)               Any tax on Landlord’s rent, right to rent or other income from the Building or as against Landlord’s business of leasing any of the Building;

 

(ii)              Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election ( Proposition 13 ”) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for purposes of this Lease; provided, however, that Landlord shall in each case elect to pay any such assessments, taxes, fees, levies and charges over the course of the longest term permitted by applicable Laws provided such election does not require Landlord to incur any additional costs or expenses;

 

(iii)             Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross income tax upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof;

 

(iv)             Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises; and

 

(v)              Any reasonable expenses incurred by Landlord in attempting to protest, reduce or minimize Tax Expenses.

 

4.2.3.2    Notwithstanding anything to the contrary contained in this Section 4.2.3 , there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state net income taxes, and other taxes to the extent applicable to Landlord’s net income (as opposed to rents, receipts or income attributable to operations at the Building), (ii) any items included as Operating Expenses or Utilities Costs, (iii) any items paid by Tenant under Section 4.4 of this Lease and (iv) any penalties resulting from Landlord’s late payment or nonpayment of any Tax Expenses (except to the extent due to a breach by Tenant of its obligations under this Lease).

 

4.2.4           Tenant’s Share ” shall mean the percentage set forth in Section 9.1 of the Summary. Tenant hereby waives any and all claims at law or in equity based on Landlord’s determination of Tenant’s Share. Notwithstanding the foregoing or anything to the contrary in this Lease, to the extent any Utilities Costs or Operating Expenses paid by Landlord are allocated entirely to the Premises by the applicable provider or are otherwise equitably allocable to only the Premises, at Landlord’s election, Tenant’s Share shall be deemed to be one hundred percent (100%) of such Utilities Costs or Operating Expenses based on such allocation by said provider or such equitable allocation by Landlord.

 

4.2.5       “ Utilities Costs ” shall mean all actual charges for utilities for the Building which Landlord shall pay, including, but not limited to, the costs of water, sewer and electricity, and the costs of HVAC (including, the cost of electricity to operate the HVAC units) and other utilities as well as related fees, assessments and surcharges (but excluding those charges for which tenants directly reimburse Landlord or otherwise pay directly to the utility company). Utilities Costs shall be calculated assuming the Building is one hundred percent (100%) occupied. If Landlord shall not provide any utilities (the cost of which, if provided by Landlord, would be included in Utilities Costs) to a tenant (including Tenant) who has undertaken to provide the same instead of Landlord, Utilities Costs shall be deemed to be increased by an amount equal to the additional Utilities Costs which would reasonably have been incurred during such period by Landlord if Landlord had at its own expense provided such utilities to such tenant; provided however, if Tenant has undertaken to obtain its own utilities instead of from Landlord, then Tenant’s Share of such Utility Costs shall be reduced by the amount paid by Tenant for such utilities. Utilities Costs shall include any costs of utilities which are allocated to the Building under any declaration,

 

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restrictive covenant, or other instrument pertaining to the sharing of costs by the Building or any portion thereof, including any covenants, conditions or restrictions now or hereafter recorded against or affecting the Building.

 

4.3          Calculation and Payment of Additional Rent.

 

4.3.1       Statement of Actual Operating Expenses, Tax Expenses and Utilities Costs and Payment by Tenant . Landlord shall endeavor to give to Tenant on or before the thirtieth (30 th ) day of June following the end of each calendar year during the Lease Term, a statement (the “ Statement ”) which shall state the Operating Expenses, Tax Expenses and Utilities Costs incurred or accrued for such preceding calendar year. Upon receipt of the Statement for each calendar year ending during the Lease Term, Tenant shall pay, within fifteen (15) days following delivery of the Statement, the full amount of the Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Expenses for such calendar year, less the amounts, if any, paid during such calendar year as “Estimated Expense Payments,” as that term is defined in Section 4.3.2 of this Lease. If, the Estimated Expense Payments made by Tenant for any calendar year exceed the actual amount of the Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Expenses for such calendar year, Landlord shall credit such excess to Tenant for sums then due or coming due hereunder or, at Landlord’s option, pay such excess to Tenant provided, however, that if Tenant is in default hereunder beyond any applicable notice and cure period set forth in Section 19.1 below, such payment shall be delayed until such time that Tenant has cured such default (or, at Landlord’s option, applied to the extent necessary to cure such default). The failure of Landlord to timely furnish the Statement shall not prejudice Landlord from enforcing its rights under this Article 4 . The provisions of this Section 4.3.1 shall survive the expiration or earlier termination of the Lease Term.

 

4.3.2       Statement of Estimated Operating Expenses, Tax Expenses and Utilities Costs . In addition, Landlord shall endeavor to give Tenant, on or before March 1 of each calendar year during the Lease Term, a yearly expense estimate statement (the “Estimate Statement”) which shall set forth Landlord’s reasonable estimate (the “ Estimate ”) of what the total amount of Operating Expenses, Tax Expenses and Utilities Costs allocated to the Building pursuant to Article 4 shall be and the estimated amount of Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Costs (the “ Estimated Expense Payments ”) for such calendar year. The failure of Landlord to timely furnish the Estimate Statement for any calendar year shall not preclude Landlord from enforcing its rights to collect any Operating Expenses, Tax Expenses or Utilities Costs under this Article 4 . Upon delivery of the Estimate Statement, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Expense Payments for the then-current calendar year (reduced by any amounts paid pursuant to the last sentence of this Section 4.3.2 ). Such fraction shall have as its numerator the number of months which have elapsed in such current calendar year to the month of such payment, both months inclusive, and shall have twelve (12) as its denominator. Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Expense Payments set forth in the previous Estimate Statement delivered by Landlord to Tenant.

 

4.4          Taxes and Other Charges for Which Tenant Is Directly Responsible . Tenant shall reimburse Landlord upon demand for any and all taxes or assessments required to be paid by Landlord (except to the extent included in Tax Expenses by Landlord or specifically excluded from the definition of Tax Expenses), excluding state, local and federal personal or corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when:

 

4.4.1        said taxes are measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures and other personal property located in the Premises, or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, to the extent the cost or value of such leasehold improvements exceeds the cost or value of a building standard build-out as determined by Landlord regardless of whether title to such improvements shall be vested in Tenant or Landlord;

 

4.4.2       said taxes are assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Building; or

 

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4.4.3       said taxes are assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

 

4.5          Late Charges . If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord’s designee by the due date therefor, then Tenant shall pay to Landlord, within fifteen (15) days after demand therefor, a late charge equal to ten percent (10%) of the amount due. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord’s other rights and remedies hereunder, at law and/or in equity and shall not be construed as liquidated damages or as limiting Landlord’s remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid by the date that they are due shall thereafter bear interest until paid at a rate (the “ Interest Rate ”) equal to the lesser of (i) the “Prime Rate” or “Reference Rate” announced from time to time by the Bank of America {or such reasonable comparable national banking institution as selected by Landlord in the event Bank of America ceases to exist or publish a Prime Rate or Reference Rate), plus four percent (4%), or (ii) the highest rate permitted by applicable law.

 

4.6          Landlord’s Books and Records . Upon Tenant’s written request given not more than sixty (60) days after Tenant’s receipt of a Statement, and provided that Tenant is not then in monetary or material non-monetary default under this Lease, specifically including, but not limited to, the timely payment of Additional Rent (whether or not a component thereof is the subject of the audit contemplated herein), Landlord shall furnish Tenant with reasonable supporting documentation pertaining to the Statement Landlord shall provide said information pertaining to the relevant Statement within sixty (60) days after Tenant’s written request therefor. Within one hundred eighty (180) days after receipt of a Statement by Tenant (the “ Review Period ”), if Tenant disputes the amount set forth in the Statement, an independent certified public accountant (which accountant (A) is a member of a nationally or regionally recognized accounting firm, and (B) is not working on a contingency fee basis), designated and paid for by Tenant, may, after reasonable notice to Landlord and at reasonable times, audit Landlord’s records with respect to the amounts set forth in the Statement at Landlord’s corporate offices, provided that (i) Tenant is not then in default under this Lease (ii) Tenant has paid all amounts required to be paid under the applicable Statement, and (iii) a copy of the audit agreement between Tenant and its particular auditor has been delivered to Landlord prior to the commencement of the audit. In connection with such audit, Tenant and Tenant’s agents must agree in advance to follow Landlord’s reasonable rules and procedures regarding an audit of the aforementioned Landlord records, and shall execute a commercially reasonable confidentiality agreement regarding such audit. Any audit report prepared by Tenant’s auditors shall be delivered concurrently to Landlord and Tenant within the Review Period. Tenant’s failure to audit the amount set forth in any Statement within the Review Period shall be deemed to be Tenant’s approval of such Statement and Tenant, thereafter, waives the right or ability to audit the amounts set forth in such Statement. Tenant hereby acknowledges that Tenant’s sole right to audit Landlord’s books and records and to contest the amount of Operating Expenses, Tax Expenses and Utilities Costs payable by Tenant shall be as set forth in this Section 4.6 , and Tenant hereby waives any and all other rights pursuant to applicable law to audit such books and records and/or to contest the amount of Operating Expenses, Tax Expenses and Utilities Costs payable by Tenant.

 

ARTICLE 5

 

USE OF PREMISES

 

Tenant shall use the Second Floor Premises solely for general office use and shall use the First Floor Premises for the retail sale of health information applications and appliances and professional services associated therewith (the “ Permitted Use ”), and Tenant shall not use or permit the Premises to be used for any other purpose or purposes whatsoever, Notwithstanding the foregoing, Tenant understands and acknowledges that use of the Premises is ultimately limited by, among other things, applicable Laws, specifically including, without limitation, zoning ordinances of the City of Palo Alto, and Landlord makes no representation or warranty whatsoever with regard to whether any prospective use of the Premises (including, without limitation, the Permitted Use) is permitted under applicable Laws. Within five (5) days following Landlord’s request, Tenant shall provide Landlord any evidence reasonably requested by Landlord confirming Tenant’s use of the Premises is in compliance with applicable Laws. Tenant further covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose hi violation of the provisions of Exhibit D attached hereto (or any reasonable modifications thereto of which Tenant has notice) or in violation of the laws, ordinances,

 

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regulations, codes, orders or requirements of the United States of America, the State of California, or the local municipal or county governing body or other lawful authorities having jurisdiction over the Building, including, without limitation, the City of Palo Alto (collectively, “ Laws ”). Tenant shall not violate any recorded covenants, conditions, and restrictions, and the provisions of all ground or underlying leases, now or hereafter affecting the Building. All noise and odors generated by Tenant in its use of the Premises shall be confined, abated or muffled so that it does not unreasonably interfere with the businesses of or unreasonably annoy the occupants and/or users of other properties or premises. Tenant shall at all times maintain the Premises in a clean, neat and orderly condition. Notwithstanding anything in this Lease to the contrary, (i) Tenant shall not permit or suffer the Second Floor Premises to be occupied by more than five employees per thousand square feet (5/1000) at any one time and (ii) Tenant shall not permit or suffer the First Floor Premises to be occupied by more than four employees per thousand square feet (4/1000) at any one time.. Tenant shall not commit or allow to be committed any waste in or upon the Premises and shall refrain from using or permitting the use of the Premises or any portion thereof as living quarters, sleeping quarters or for lodging purposes.

 

ARTICLE 6

 

SERVICES AND UTILITIES

 

6.1          Standard Tenant Services , Landlord shall provide the following services on all days during the Lease Term, unless otherwise stated below.

 

6.1.1       Subject to reasonable changes implemented by Landlord and to all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating and air conditioning when necessary for normal comfort for normal office use in the Premises, from Monday through Saturday, during the period from 7:00 a.m. to 6:00 p.m., except for the date of observation of New Year’s Day, Independence Day, Thanksgiving Day and, Christmas Day.

 

6.1.2       Landlord shall provide adequate electrical wiring and facilities for the Permitted Use as reasonably determined by Landlord.

 

6.1.3       Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes.

 

6.1.4       Landlord shall provide janitorial service to the Premises consistent with other similar Buildings in Downtown Palo Alto.

 

6.2          Overstandard Tenant Use . Tenant shall not, without Landlord’s prior written consent, use heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease. If such consent is given, Landlord shall have the right to install supplementary air conditioning units or other facilities in the Premises, including supplementary or additional metering devices, and the actual and reasonable cost thereof, including the actual and reasonable cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges, shall be paid by Tenant to Landlord upon billing by Landlord. If Tenant uses water or heat or ah” conditioning in excess of that supplied by Landlord pursuant to Section 6.1 of this Lease, or if Tenant’s consumption of electricity shall exceed two (2) watts connected load per square foot of usable area of the Premises, calculated on a monthly basis for the hours described in Section 6.1.1 above, Tenant shall pay to Landlord, within thirty (30) days after billing and as additional rent, the cost of such excess consumption, the cost of the installation, operation) and maintenance of equipment which is installed in order to supply such excess consumption, and the cost of the increased wear and tear on existing equipment caused by such excess consumption; and Landlord may install devices to separately meter any increased use, and in such event Tenant shall pay, as additional rent, the increased cost directly to Landlord, within thirty (30) days after demand, including the cost of such additional metering devices. If Tenant desires to use heat, ventilation or air conditioning during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1 of this Lease, (i) Tenant shall give Landlord such prior notice, as Landlord shall from time to time establish as appropriate, of Tenant’s desired use, (ii) Landlord shall supply such heating, ventilating and air

 

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conditioning to Tenant at such hourly cost to Tenant as Landlord shall from time to time establish, which shall be no more than the costs of similar after hours services customarily imposed by landlords of similar buildings in Downtown Palo Alto, and (iii) Tenant shall pay such cost within thirty (30) days after billing, as additional rent.

 

6.3          Interruption of Use . Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building after reasonable effort to do so, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord’s reasonable control; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant’s business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6 . Notwithstanding anything to the contrary in this Lease, if the Premises are not reasonably suitable for Tenant’s use as a consequence of utilities interruption caused by the gross negligence of Landlord or its agents, employees or contractors and if restoration of such utilities service is within the reasonable control of Landlord, then Tenant shall be entitled to an equitable abatement of Rent to the extent such interference continues for more than five (5) consecutive business days.

 

6.4          Additional Services . Landlord shall also have the exclusive right, but not the obligation, to provide any additional services which may be required by Tenant, including, without limitation, locksmithing, lamp replacement, janitorial service, and additional repairs and maintenance, provided that Tenant shall pay to Landlord within thirty (30) days of billing, the sum of all costs to Landlord of such additional services, plus a reasonable administration fee. Charges for any utilities or services for which Tenant is required to pay from time to time hereunder, shall be deemed Additional Rent hereunder and shall be billed on a monthly basis.

 

ARTICLE 7

 

REPAIRS

 

7.1          Tenant’s Repairs . Subject to Landlord’s repair obligations in Sections 7.2 and 11.1 below, Tenant shall, at Tenant’s own expense, keep the Premises, including all improvements (specifically including, without limitation, the Tenant Improvements (as defined in Exhibit B attached hereto) and any Alterations (as defined below)), plate glass, doors and related hardware, equipment, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Term, which repair obligations shall include, without limitation, the obligation to promptly and adequately repair all damage to the Premises and replace or repair all damaged or broken fixtures and appurtenances; provided however, that, at Landlord’s option or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements forthwith upon being billed for same.

 

7.2          Landlord’s Repairs . Subject to Articles 4, 11 and 12 of this Lease, Landlord shall repair and maintain the common areas and the structural portions of the Building, including the basic plumbing, heating, ventilating, air conditioning, fire suppression and electrical systems serving the Building (except to the extent said systems are located in or exclusively service the Premises, in which event Tenant shall be responsible therefor); provided, however, that to the extent such maintenance and repairs are necessitated by the act, omission, negligence or willful misconduct of Tenant, its agents, servants, employees or invitees, Tenant shall pay to Landlord as additional rent, the reasonable cost of such maintenance and repairs. There shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant hereby waives and releases its right to make repairs at Landlord’s expense under Sections 1941 and 1942 of the California Civil Code; or under any similar law, statute, or ordinance now or hereafter in effect.

 

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ARTICLE 8

 

ADDITIONS AND ALTERATIONS

 

8.1          Landlord’s Consent to Alterations . Tenant may not make any improvements, alterations, additions or changes to the Premises (collectively, the “ Alterations ”) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld, conditioned or delayed by Landlord; provided, however, Landlord may withhold its consent in its sole and absolute discretion with respect to any Alterations which may affect the structural components of the Building or the Systems and Equipment or which can be seen from outside the Premises. Tenant shall pay for all overhead, general conditions, fees and other costs and expenses of the Alterations, and shall pay to Landlord a Landlord supervision fee of five percent (5%) of the cost of the Alterations. Notwithstanding the foregoing, Tenant may construct, without Landlord’s consent, Alterations in the Premises, the cost of which do not exceed Twenty Thousand Dollars ($20,000) per year, and which do not affect the structural components of the Building or the Systems and Equipment or which cannot be seen from outside the Premises (collectively, “ Minor Alterations ”); provided, however, Tenant shall notify Landlord at least fifteen (15) days prior to commencing such Minor Alterations, which notice shall describe in reasonable detail the scope of Minor Alterations Tenant intends to perform or cause to be performed. Landlord shall not be entitled to a supervision fee with respect to Minor Alterations.

 

8.2          Manner of Construction . Landlord may impose, as a condition of its consent to all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that Tenant utilize for such purposes only contractors, materials, mechanics and materialmen reasonably approved by Landlord; provided, however, Landlord may impose such requirements as Landlord may determine, in its sole and absolute discretion, with respect to any work affecting the structural components of the Building or Systems and Equipment (including designating specific contractors to perform such work). Tenant shall construct such Alterations and perform such repairs in conformance with any and all applicable rules and regulations of any federal, state, county or municipal code or ordinance and pursuant to a valid building permit, issued by the City of Palo Alto, and in conformance with Landlord’s construction rules and regulations. Landlord’s approval of the plans, specifications and working drawings for Tenant’s Alterations shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities. All work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. In performing the work of any such Alterations, Tenant shall have the work performed in such manner as not to obstruct access to the Building or the Common Areas for any other tenant of the Building, and as not to obstruct the business of Landlord or other tenants of the Building, or interfere with the labor force working at the Building. If Tenant makes any Alterations, Tenant agrees to carry a commercial general liability insurance policy, as well as “Builder’s All Risk” insurance in an amount reasonably approved by Landlord covering the construction of such Alterations, or cause its general contractor to carry such insurance, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof. In addition, Landlord may, in its discretion, with respect to Alterations costing in excess of One Hundred Thousand Dollars ($100,000) per project, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a co-obligee. Upon completion of any Alterations, Tenant shall (i) cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, (ii) deliver to the management office of the Building a reproducible copy of the “as built” drawings of the Alterations, and (iii) deliver to Landlord evidence of payment, contractors’ affidavits and full and final waivers of all liens for labor, services or materials.

 

8.3          Landlord’s Property . All Alterations, improvements, fixtures and/or equipment which may be installed or placed in or about the Premises, including any cabling and wiring associated with any telephone system or network, and all signs installed in, on or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord upon the expiration or earlier termination of this Lease; provided, however, Tenant’s trade fixtures and equipment shall remain the property of Tenant and shall be removed by Tenant pursuant to the provisions of Section 15.2 below prior to the expiration or earlier termination of this Lease.

 

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Notwithstanding the foregoing provisions of this Section 8.3 , upon request by Landlord prior to the expiration of this Lease (or anytime following any earlier termination of this Lease) Tenant shall remove, prior the expiration or early termination of the Lease Term (or anytime following any earlier termination of this Lease), any improvements or Alterations (including any cabling and wiring associated with any telephone system or network) constructed by or for the benefit of Tenant and shall repair any damage to the Premises and Building caused by such removal; provided, however, promptly following Tenant’s written request for confirmation, which request must be made by Tenant no sooner than ninety (90) days prior to expiration of the Lease Term. Landlord shall confirm which improvements and Alterations Landlord will permit to remain upon expiration of the Lease Term. Furthermore, if Tenant fails to complete such removal and/or to repair any damage caused by the removal of any improvements or Alterations (including any cabling and wiring associated with any telephone system or network), Landlord may do so and may charge the cost thereof to Tenant (together with a five percent (5%) supervision/administration fee), and Tenant shall pay such cost to Landlord within thirty (30) days of being billed for the same.

 

8.4          Tenant Improvements . The provisions of the foregoing Sections 8.1 and 8.2 shall not be applicable to the design and construction of the Tenant Improvements (which design and construction shall instead shall be governed by Exhibit B attached hereto); however, for all other purposes under this Lease, the phrase “Alterations” shall be deemed to also include the Tenant Improvements.

 

ARTICLE 9

 

COVENANT AGAINST LIENS

 

Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Building or the Real Property, and any and all liens and encumbrances created by Tenant shall attach to Tenant’s interest only. Landlord shall have the right at all times to post and keep posted on the Premises any notice which it deems necessary for protection from such liens. Tenant covenants and agrees not to suffer or permit any lien of mechanics or materialmen or others to be placed against the Building or the Real Property with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises, and, in case of any such lien attaching or notice of any lien, Tenant covenants and agrees to cause it to be immediately released and removed of record. Notwithstanding anything to the contrary set forth in this Lease, if any such lien is not released and removed on or before the date notice of such lien is delivered by Landlord to Tenant, Landlord, at its sole option, may immediately take all action necessary to release and remove such lien, without any duty to investigate the validity thereof, and all sums, costs and expenses, including reasonable attorneys’ fees and costs, incurred by Landlord in connection with such lien shall be deemed Additional Rent under this Lease and shall immediately be due and payable by Tenant.

 

ARTICLE 10

 

INDEMNIFICATION AND INSURANCE

 

10.1        Indemnification and Waiver . To the maximum extent permitted by law, Tenant hereby assumes all risk of damage to property and injury to persons, in, on, or about the Premises, the Building or the Real Property from any cause whatsoever and agrees that neither Landlord or its officers, agents, property managers, servants, lenders, employees, and independent contractors (collectively, “ Landlord Parties ”) shall be liable for, and are hereby released from any responsibility for, any damage to property or injury to persons-or resulting from the loss of use thereof, which damage or injury is sustained by Tenant or by other persons claiming through Tenant. To the maximum extent permitted by law, Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all losses, claims, costs, damages, expenses, causes of action and liabilities (including without limitation court costs and reasonable attorneys’ fees) incurred in connection with or arising from (i) any breach or default by Tenant under this Lease, (ii) any cause in, on or about the Premises (including, without limitation, Tenant’s installation, placement operation and removal of Alterations, improvements, fixtures, furniture, devices, apparatus and/or equipment in, on or about the Premises), or (iii) the negligence or willful misconduct of Tenant or its contractors, agents, servants, employees, licensees or invitees (collectively, “ Tenant Parties ”); provided, however, that the terms of the foregoing indemnity shall not apply to the gross active negligence or willful

 

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misconduct of Landlord Parties. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease.

 

10.2        Tenant’s Compliance with Landlord’s Fire and Casualty Insurance . Tenant shall, at Tenant’s expense, comply as to the Premises with all insurance company requirements pertaining to the use of the Premises. Tenant shall not conduct nor permit any other person to conduct any activities nor keep, store or use (or allow any other person to keep, store or use) any item or thing within the Premises, the Building, the Common Areas or the Property which (i) is prohibited under the terms of any such policies, (ii) could result in the termination of the coverage afforded under any of such policies, or (iii) could give to the insurance carrier the right to cancel any of such policies. If the nature of Tenant’s conduct or use of the Premises causes any increase in the premium for such insurance policies, then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.

 

10.3        Tenant’s Insurance . Tenant shall maintain the following coverages in the following amounts.

 

10.3.1     Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage arising out of Tenant’s operations, assumed liabilities or use of the Premises, including a Broad Form Commercial General Liability endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, (and with owned and non-owned automobile liability coverage, and liquor liability coverage in the event alcoholic beverages are served on the Premises) for limits of liability not less than;

 

Bodily Injury and

$2,000,000 each occurrence

Property Damage Liability

$3,000,000 annual aggregate

 

 

Personal Injury Liability

$2,000,000 each occurrence

 

$3,000,000 annual aggregate

 

0% Insured’s participation

 

10.3.2     Physical Damage Insurance covering (i) all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant’s property on the Premises installed by, for, or at the expense of Tenant, (ii) the Alterations, including any Alterations which Landlord permits to be installed above the ceiling of the Premises or below the floor of the Premises, (iii) all other improvements, alterations and additions to the Premises, including any improvements, alterations or additions installed at Tenant’s request above the ceiling of the Premises or below the floor of the Premises and (iv) all plate glass and exterior glazing. Such insurance shall be written on a “physical loss or damage” basis under a “special form” policy, for the full replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage coverage.

 

10.3.3     Workers’ compensation insurance as required by law.

 

10.3.4     Loss-of-income, business interruption and extra-expense insurance providing coverage in such amounts as will reimburse Tenant for no less than twelve (12) months of direct and indirect loss of earnings attributable to all perils commonly insured against by Tenant’s property insurance required hereunder or attributable to prevention of loss of access to the Premises or to the Building as a result of such perils.

 

10.3.5     Tenant shall carry comprehensive automobile liability insurance having a combined single limit of not less than Two Million Dollars ($2,000,000.00) per occurrence and insuring Tenant against liability for claims arising out of ownership, maintenance or use of any owned, hired or non-owned automobiles.

 

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10.3.6     The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall: (i) name Landlord, and any other party it so specifies, as an additional insured; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant’s obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A-VIII in Best’s Insurance Guide or which is otherwise reasonably acceptable to Landlord and licensed to do business in California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance requirement of Tenant; (v) provide that said insurance shall not be canceled or coverage changed-unless thirty (30) days’ prior written notice shall have been given to Landlord and any mortgagee or ground or underlying lessor of Landlord; (vi) contain a cross-liability endorsement or severability of interest clause reasonably acceptable to Landlord; and (vii) with respect to the insurance required in Sections 10.3.1 and 10.3.2 above, have deductible amounts not exceeding Five Thousand Dollars ($5,000.00). Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least ten (10) days before the expiration dates thereof. If Tenant shall fail to procure such insurance, or to deliver such policies or certificate, within such time periods, Landlord may, at its option, in addition to all of its other rights and remedies under this Lease, and without regard to any notice and cure periods set forth in Section 19.1 , procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within ten (10) days after delivery of bills therefor.

 

10.4        Subrogation . Landlord and Tenant agree to have their respective insurance companies issuing property damage insurance waive any rights of subrogation that such companies may have against Landlord or Tenant, as the case may be, so long as the insurance carried by Landlord and Tenant, respectively, is not invalidated thereby. As long as such waivers of subrogation are contained in their respective insurance policies, Landlord and Tenant hereby waive any right that either may have against the other on account of any loss or damage to their respective property to the extent such loss or damage is insurable under policies of insurance for fire and all risk coverage, theft, public liability, or other similar insurance, regardless of any negligence on the part of either party.

 

10.5        Additional Insurance Obligations . Tenant shall carry and maintain during the entire Lease Term, at Tenant’s sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 10 , and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant’s operations therein, as may he reasonably requested by Landlord.

 

ARTICLE 11

 

DAMAGE AND DESTRUCTION

 

11.1        Repair of Damage to Premises by Landlord . Tenant shall promptly notify Landlord of any damage to the Premises resulting from fire or any other casualty. If the Premises or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall (i) within sixty (60) days following such fire or casualty, notify Tenant in writing of Landlord’s reasonable expectation of the time required to restore any damage to the Premises caused by such fire or other casualty (the “ Restoration Notice ”), and (ii) promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord’s reasonable control, and subject to all other terms of this Article 11 , restore the base, shell, and core of the Premises and such Common Areas. Such restoration shall be to substantially the same condition of the base, shell, and core of the Premises and Common Areas prior to the casualty, except for modifications required by zoning and building codes and other Laws or by the holder of a mortgage on the Building or the Real Property, or the lessor of a ground or underlying lease with respect to the Building and/or the Real Property, or any other modifications to the Common Areas deemed desirable by Landlord, provided access to the Premises and any common restrooms serving the Premises shall not be materially impaired. Notwithstanding any other provision of this Lease, upon the occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s insurance required under Section 10.3 of this Lease to the extent attributable to any Alterations, and Landlord shall repair any injury or damage to the tenant improvements and Alterations installed in the Premises and shall return such tenant improvements and Alterations to their original condition; provided that if the reasonably estimated cost of restoring such Alterations, as reasonably determined by Landlord’s contactor prior to restoration, exceeds the amount of insurance proceeds received by Landlord from Tenant’s insurance carrier, as assigned by Tenant, then the positive difference between the reasonable estimated cost

 

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of such repairs and the amount of insurance proceeds received by Landlord from Tenant’s insurance carrier shall be paid by Tenant to Landlord prior to Landlord’s repair of the damage. Notwithstanding anything to the contrary herein, in no event shall Landlord be obligated to repair or restore any specialized or dedicated equipment serving Tenant, such as any cabling, wiring, supplemental utility system, telephone system or wireless/Wi-Fi network. In connection with such repairs and replacements, Tenant shall, prior to the commencement of construction, submit to Landlord, for Landlord’s review and approval, all plans, specifications and working drawings relating thereto, and Landlord shall select the contractors to perform such improvement work. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or Common Areas necessary to Tenant’s occupancy, and if such damage is not the result of the negligence or willful misconduct of Tenant or Tenant’s employees, contractors, licensees, or invitees, Tenant shall be entitled to a proportionate abatement of Base Rent and Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Costs to the extent Landlord is reimbursed from the proceeds of rental interruption insurance purchased by Landlord as part of Operating Expenses, during the time and to the extent the all or a portion of the Premises are unfit for occupancy for the purposes permitted under this Lease, and not occupied by Tenant as a result thereof.

 

11.2        Landlord’s Option to Repair . Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises, the Building and/or any other portion of the Real Property and instead terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of damage, such notice to include a termination date as of the date of such damage, giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the Building shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) repairs cannot reasonably be completed within one hundred eighty (180) days of the date of damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building or ground or underlying lessor with respect to the Building and/or the Real Property shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground or underlying lease, as the case may be; or (iii) the damage is not fully covered, except for deductible amounts, by Landlord’s insurance policies. In addition, if the Premises or the Building is destroyed or damaged to any substantial extent during the last twelve (12) months of the Lease Term, then notwithstanding anything contained in this Article 11 , Landlord shall have the option to terminate this Lease by giving written notice to Tenant of the exercise of such option within thirty (30) days after such damage or destruction, in which event this Lease shall cease and terminate as of the date of such damage. In the event Landlord elects to restore the Premises or the Building, and the Restoration Notice estimates that the time required for such restoration shall exceed one year, Tenant shall have the right to terminate this Lease upon written notice to Landlord within ten (10) days following Tenant’s receipt of the Restoration Notice. In addition, if Landlord elects to restore the Premises or the Building, and such restoration exceeds Landlord’s estimate set forth in the Restoration Notice by a period of more than ninety (90) days, Tenant shall have the right to terminate this Lease upon written notice to Landlord, delivered not more than ten (10) days following such additional ninety (90) day period. Upon any such termination of this Lease pursuant to this Section 11.2 , Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of termination, and both parties hereto shall thereafter be freed and discharged of all farther obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term.

 

11.3        Waiver of Statutory Provisions . The provisions of this Lease, including this Article 11 , constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or any other portion of the Real Property, and any statute or regulation of the state of California, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or any other portion of the Real Property.

 

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ARTICLE 12

 

CONDEMNATION

 

12.1        Permanent Taking . If the whole or any part of the Premises, Building or the Real Property shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises, Building or the Real Property, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease upon ninety (90) days’ notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. If more than twenty-five percent (25%) of the rentable square feet of the Premises is taken, or if access to the Premises is substantially impaired, Tenant shall have the option to terminate this Lease upon ninety (90) days’ notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking. Landlord shall be entitled to receive the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant’s personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claim does not diminish the award available to Landlord, its ground lessor with respect to the Building or its mortgagee, and such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination, or the date of such taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Base Rent and Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Costs shall be proportionately abated. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of the California Code of Civil Procedure.

 

12.2        Temporary Taking . Notwithstanding anything to the contrary contained in this Article 12 , in the event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, then this Lease shall not terminate but the Base Rent and Tenant’s Share of Operating Expenses, Tax Expenses and Utilities Costs shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking.

 

ARTICLE 13

 

COVENANT OF QUIET ENJOYMENT

 

Landlord covenants that so long as Tenant is not in default of its obligations under this Lease beyond any applicable notice and cure period, Tenant shall peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant express or implied.

 

ARTICLE 14

 

ASSIGNMENT AND SUBLETTING

 

14.1        Transfers . Tenant shall not, without the prior written consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment or other such foregoing transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or permit the use of the Premises by any persons other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as “ Transfers ” and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a “ Transferee ”). If Tenant shall desire Landlord’s consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the “ Transfer Notice ”) shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the “ Subject Space ”), (iii) all of the terms of the proposed Transfer, the name and address of the proposed Transferee, and a copy of all existing and/or

 

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proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and (v) such other information relating to the business of the proposed Transferee as Landlord may reasonably require. Any Transfer made without Landlord’s prior written consent (if required hereunder) shall, at Landlord’s option, be null, void and of no effect, and shall, at Landlord’s option, constitute a default by Tenant under this Lease. Each time Tenant requests Landlord’s consent to a proposed Transfer, whether or not Landlord shall grant consent, within thirty (30) days after written request by Landlord, as Additional Rent hereunder, Tenant shall reimburse Landlord for any reasonable legal fees incurred by Landlord in connection with Tenant’s proposed Transfer.

 

14.2        Landlord’s Consent. Landlord shall not unreasonably withhold, condition or delay its consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice. The parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply, without limitation as to other reasonable grounds for withholding consent:

 

14.2.1     The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building;

 

14.2.2     The Transferee intends to use the Subject Space for purposes winch are not permitted under this Lease;

 

14.2.3     The Transferee is either a governmental agency or instrumentality thereof;

 

14.2.4     The Transfer will result in more than the legally permitted number of occupants per floor within the Subject Space;

 

14.2.5     The Transferee is not a party of reasonable financial worth and/or financial stability that has and will continue to have sufficient financial strength to perform all of the remaining obligations of Tenant under the Lease (or in the case of a subletting, then its obligations under the sublease) from and after the date of transfer, as reasonably determined by Landlord taking into account all relevant facts and circumstances;

 

14.2.6     The proposed Transfer would cause Landlord to be in violation of another lease with a tenant in the Building, or would give an occupant of the Building a right to cancel its lease;

 

14.2.7  The terms of the proposed Transfer will grant the Transferee the right to exercise a right of renewal, right of expansion, right of first offer, or other similar right held by Tenant, or will require Tenant to exercise such right on behalf of such Transferee; or

 

14.2.8  Either the proposed Transferee (or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee) is negotiating with Landlord, or has negotiated with Landlord during the prior six (6) month period, to lease space in the Building.

 

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant may within six (6) months after Landlord’s consent, but not later than the expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice (i) such that Landlord would initially have been entitled to refuse its consent to such Transfer under this Section 14.2 , or (ii) which would cause the proposed Transfer to be more favorable to the Transferee than the terms set forth in Tenant’s original Transfer Notice, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord’s right of recapture, if any, under Section 14.4 of this Lease).

 

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14.3        Transfer Premium . If Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined in this Section 14.3 , received by Tenant from such Transferee. “ Transfer Premium ” shall mean all rent, additional rent or other consideration payable by such Transferee in excess of the Rent and Additional Rent payable by Tenant under this Lease on a per rentable square foot basis if less than all of the Premises is transferred, after deducting the reasonable expenses incurred by Tenant for (i)any reasonable changes, alterations and improvements to the Premises in connection with the Transfer (but only to the extent approved by Landlord as required herein), and (ii) any reasonable brokerage commissions and reasonable attorneys’ fees in connection with the Transfer. “Transfer Premium” shall also include, but not be limited to, key money and bonus money paid by Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee in connection with such Transfer.

 

14.4        Landlord’s Option as to Subject Space . Notwithstanding anything to the contrary contained in this Article 14 , Landlord shall have the option, by giving written notice to Tenant within ten (10) business days after receipt of any Transfer Notice, to recapture the Subject Space. Such recapture notice shall cancel and terminate this Lease with respect to the Subject Space as of the date stated in the Transfer Notice as the effective date of the proposed Transfer until, at Landlord’s election, (i) the last day of the term of the Transfer as set forth in the Transfer Notice or (ii) the expiration of the Lease Term. If this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to elect in a timely manner to recapture the Subject Space under this Section 14.4 , then, provided Landlord has consented to the proposed Transfer, Tenant shall be entitled to proceed to transfer the Subject Space to the proposed Transferee, subject to provisions of the last paragraph of Section 14.2 of this Lease.

 

14.5        Effect of Transfer . If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (iv) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord’s consent, shall relieve Tenant or any guarantor of the Lease from liability under this Lease. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall, within thirty (30) days after demand, pay the deficiency and Landlord’s costs of such audit.

 

14.6        Additional Transfers . For purposes of this Lease, the term “Transfer” shall also include (i) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law during the Term, of fifty percent (50%) or more of the partners, or transfer of twenty-five percent or more of partnership interests, or the dissolution of the partnership, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant, (B) the sale or other transfer of more than an aggregate of thirty percent (30%) of the voting shares of Tenant (other than to immediate family members by reason of gift or death) during the Term, or (C) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of the value of the unencumbered assets of Tenant within a twelve (12) month period.

 

14.7        General Conditions Applicable to Transfer . Any Transfer hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be terminated during the term of any sublease or similar occupancy arrangement, Landlord shall have the right, in its sole and absolute discretion, to: (a) treat such sublease or occupancy agreement as canceled and repossess the entire Premises by any lawful means, or (b) require that such subtenant or occupant attorn to and recognize Landlord as its landlord under any such sublease or occupancy agreement. If Tenant shall be in default under this Lease, Landlord is hereby irrevocably authorized to direct any subtenant or occupant to make all payments under or in connection with a sublease or occupancy agreement directly to Landlord (which landlord shall apply towards Tenant’s obligations under this Lease) until

 

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such default is cured. Such subtenant or occupant shall rely on any representation by Landlord that Tenant is in default hereunder, without any need for confirmation thereof by Tenant.

 

14.8        Permitted Transfers . Notwithstanding anything to the contrary in this Lease but subject to the last sentence of this Section 14.8), Tenant may, without Landlord’s prior written consent and without the right of recapture or any participation by Landlord in assignment and subletting proceeds, sublet the Premises or assign the Lease to: (i) a parent, subsidiary, affiliate, division or corporation controlling, controlled by or under common control with Tenant; (ii) an acquirer or purchaser of all or substantially all of Tenant’s assets in the geographic market area; (iii) any entity resulting from a merger, nonbankruptcy consolidation, or other nonbankruptcy reorganization of Tenant (which shall include a change of control of Tenant resulting from any of the foregoing); and/or (iv) any entity or person by sale or other transfer of a percentage of capital stock of Tenant which results in a change of controlling persons. Any of the above are referenced hereafter as “Permitted Transfer” and the transferee is referenced as “Permitted Transferee”. For the purpose of this Lease, sale of Tenant’s capital stock through any public exchange or the issuance of capital stock in connection with a bona fide financing of Tenant shall not be deemed an assignment, subletting, or any other transfer of the Lease or the Premises. The foregoing rights of Tenant under this Section 14.8 are expressly subject to the satisfaction of all of the following conditions: (l)the transfer contemplated by this Section 14.7 must be made for a legitimate independent business purpose and not for the purpose of transferring this Lease, (2) with respect to an assignment of this Lease or a sublease of more than fifty percent (50%) of the Premises, the proposed successor to Tenant must have a tangible net worth computed in accordance with generally accepted accounting principles consistently applied (and excluding goodwill, organization costs and other intangible assets) that is at least equal to the net worth of Tenant (A) immediately prior to the proposed assignment or sublease, or (B) on the Lease Commencement Date (as evidenced by the financial statements delivered to Landlord in connection with the negotiation of this Lease), whichever is greater, (3) Tenant shall deliver proof reasonably satisfactory to Landlord of such net worth and compliance with the other provisions of this Section 14,8 at least 10 days prior to the effective date of any such transaction (or immediately after such transaction if disclosure is prohibited by legally enforceable confidentiality requirements), (4) any such transfer shall be subject and subordinate to all of the terms and provisions of this Lease, and the transferee shall assume, in a written document reasonably satisfactory to Landlord and delivered to Landlord upon or prior to the effective date of such transfer, all the obligations of Tenant under this Lease, and (5) Tenant shall remain fully liable for all obligations to be performed by Tenant under this Lease.

 

ARTICLE 15

 

SURRENDER; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

 

15.1        Surrender of Premises . No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in a writing signed by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises.

 

15.2        Removal of Tenant Property by Tenant . Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15 , quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, free-standing cabinet work, and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and cabling, wiring or conduit (including any such cabling or wiring associated with any telephone system or network, if any) which may have been placed at the Building or within the Building by or on behalf of Tenant, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own

 

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expense all damage to the Premises and Building resulting from such removal. Any such properly not so removed by Tenant shall be deemed to be abandoned and at the option of Landlord shall either (a) become Landlord’s property without any payment to Tenant or (b) remain Tenant’s property, but Landlord shall have the right to sell or otherwise dispose of such personal property in any commercially reasonable manner, provided that any proceeds realized from the sale of Tenant’s property shall be applied first to offset all expenses of storage and sale, then credited against Tenant’s outstanding obligations under this Lease (including, without limitation, past due rent amounts and any termination damages owing by Tenant to Landlord pursuant to Article 19 hereof), and any remaining balance shall be returned to Tenant.

 

ARTICLE 16

 

HOLDING OVER

 

If Tenant holds over after the expiration of the Lease Term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Base Rent shall be payable at a monthly rate equal to one hundred fifty percent (150%) of the Base Rent applicable during the last rental period of the Term. Such month-to-month tenancy shall be subject to every other term, covenant and agreement contained herein. Landlord hereby expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys’ fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits to Landlord resulting therefrom.

 

ARTICLE 17

 

ESTOPPEL CERTIFICATES

 

Within ten (10) business days following a request in writing by Landlord, Tenant shall execute and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be in the form as may be required by any prospective mortgagee or purchaser of the Real Property (or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by Landlord or Landlord’s mortgagee or prospective mortgagee. Tenant shall execute and deliver whatever other instruments may be reasonably required for such purposes. Failure of Tenant to timely execute and deliver such estoppel certificate or other instruments shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception. Failure by Tenant to so deliver such estoppel certificate shall be a material default of the provisions of this Lease.

 

ARTICLE 18

 

SUBORDINATION

 

This Lease is subject and subordinate to all present and future ground or underlying leases of the Building and to the lien of any mortgages or trust deeds, now or hereafter in force against the Real Property, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages or trust deeds, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage, or if any ground or underlying lease is terminated, to attorn, without any deductions or set-offs whatsoever, to the purchaser upon any such foreclosure sale, or to the lessor of such ground or underlying lease, as the case may be, if so requested to do so by such purchaser or lessor and to recognize such purchaser or lessor as the lessor under this Lease. Tenant shall, within five (5) days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to

 

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any such mortgages, trust deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale. Notwithstanding anything to the contrary in this Lease, at Tenant’s request, Landlord shall use commercially reasonable efforts to obtain from any existing or future lender which has or may have a security interest in the Building an agreement on such lender’s standard form which provides for the recognition of Tenant’s interests under this Lease so long as Tenant is not in default hereunder in the event of a foreclosure of the lender’s security interest (an “SNDA”); provided, however, (i) Landlord’s obligations to use commercially reasonable efforts to obtain a SNDA shall not require Landlord to expend attorneys’ fees or initiate legal proceedings against any lender and (ii) Landlord shall have no liability and the validity of this Lease shall not be affected in the event Landlord is unable to secure an SNDA.

 

ARTICLE 19

 

TENANT’S DEFAULTS; LANDLORD’S REMEDIES

 

19.1        Events of Default by Tenant . All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and expense and without any reduction of Rent The occurrence of any of the following shall constitute a default of this Lease by Tenant:

 

19.1.1     Any failure by Tenant to pay any Rent or any other charges required to be paid under this Lease, or any part thereof, within five (5) days of the date due; or

 

19.1.2     Any failure by Tenant to observe or perform any other provision, obligation, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for fifteen (15) days after written notice thereof from Landlord to Tenant; provided however, if the nature of such default is such that the same cannot reasonably be cured within a fifteen (15) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure said default as soon as possible; or

 

19.1.3     Abandonment of the Premises by Tenant. Abandonment is herein defined to include, but is not limited to, any absence by Tenant from the Premises for three (3) business days or longer while in default of any provision of this Lease.

 

19.1.4     Any failure by Tenant to observe or perform the provisions of Sections 14.17,18 or 26.4 where such failure continues for more than three (3) business days after written notice from Landlord.

 

19.1.5 Tenant (i) makes a general assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, or suffers the filing of an involuntary petition by creditors, (iii) suffers the appointment of a receiver to take possession of all or substantially all of its assets, (iv) suffers the attachment or other judicial seizure of all or substantially all of its assets, (v) admits in writing its inability to pay its debts as they come due, or (vi) makes an offer of settlement, extension or composition to its creditors generally.

 

Tenant acknowledges that Landlord’s delivery of any notice described in the foregoing provisions of this Section 19.1 shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 or any similar or successor law.

 

19.2        Landlord’s Remedies Upon Default . Upon the occurrence of any such default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity, the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever.

 

19.2.1     Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any

 

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other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following:

 

(i)               The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus

 

(ii)              The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

 

(iii)             The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

 

(iv)             Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant, including, without limitation, any rent abatement; and

 

(v)              At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.

 

The term “rent” as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Sections 19.2.1(i)  and (ii) , above, the “worth at the time of award” shall be computed by allowing interest at the Interest Rate set forth in Section 4.5 of this Lease. As used in Section 19.2.1 (iii) a bove, the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

 

19.2.2     Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.

 

19.2.3     Landlord may, but shall not be obligated to, make any such payment or perform or otherwise cure any such obligation, provision, covenant or condition on Tenant’s part to be observed or performed (and may enter the Premises for such purposes). In the event of Tenant’s failure to perform any of its obligations or covenants under this Lease, and such failure to perform poses a material risk of injury or harm to persons or damage to or loss of property, then Landlord shall have the right to cure or otherwise perform such covenant or obligation at any time after such failure to perform by Tenant, whether or not any such notice or cure period set forth in Section 19.1 above has expired. Any such actions undertaken by Landlord pursuant to the foregoing provisions of this Section 19.2.3 shall not be deemed a waiver of Landlord’s rights and remedies as a result of Tenant’s failure to perform and shall not release Tenant from any of its obligations under this Lease.

 

19.3        Payment by Tenant . Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of statements therefor: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with Landlord’s performance or cure of any of Tenant’s obligations pursuant to the provisions of Section 19.2.3 above; and (ii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all legal fees and other amounts so

 

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EXHIBIT B-1

 

FINAL WARM SHELL PLANS

 

Tenant has been provided electronic access to and hard copies of a complete set of the NEW FOUR STORY COMMERCIAL SHELL BUILDING PERMIT 278 University Avenue Palo Alto, California (Permit Submission: 12.28.10 & Plan Check Response: 05.16.11) base building plans and specifications for the 278 University Avenue, Palo Alto Building as prepared by The Hayes Group and the various project engineers dated July 20, 2012 (the “Contract Documents”). The Contract Documents include, but are not limited to, all drawings and specifications as listed on the Drawing Index contained on Sheet A0.1 of the Contract Documents.

 

Tenant, and its agents, shall familiarize themselves with the Contract Documents and shall insure that all Tenant Improvements for the Premises are compatible with and of equal or better quality to those base Building systems defined in the Contract Documents. Should a conflict exist between the specification provided for in this Exhibit B-2 and the Contract Documents, the more stringent or higher quality application or condition shall be utilized by Tenant in the design and construction of the Tenant Improvements for the Premises.

 

The following exerts from the Contract Documents are included for reference purposed only into Exhibit B-1

 

B-1.1 Contract Document Sheet A0.1, Cover Sheet and Drawing Index

 

B-1.2 Contract Document Sheet A2.2, First Floor Plan

 

B-1.3 Contract Document Sheet A2.3, Second Floor Plan

 



 

 



 

 



 

 



 

EXHIBIT B-2

 

BUILDING STANDARD TENANT IMPROVEMENT SPECIFICATIONS

 

In the construction of all tenant improvements, Tenant shall comply with all Building standards established by Landlord including, but not limited to, those contained in this Exhibit B-2. The intent of this Exhibit B-2 is to establish minimum building specifications for Tenant to require its designers, engineers and contractors to comply with in the design and construction of Tenant’s Tenant Improvements in the Premises.

 

Tenant has been provided access to and copies of the base building plans and specifications for the 278 University Avenue, Palo Alto Building shell as prepared by The Hayes Group and the various project engineers and as approved for building permit by the City of Palo Alto (the “Contract Documents”). Tenant, and its agents, shall familiarize themselves with the Contract Documents and shall insure that all Tenant Improvements for the Premises are compatible with and of equal or better quality to those base Building systems defined in the Contract Documents. Should a conflict exist between the specification provided for in this Exhibit B-2 and the Contract Documents, the more stringent or higher quality application or condition shall be utilized by Tenant in the design and construction of the Tenant Improvements for the Premises.

 

All Tenant Improvements designed and constructed by Tenant shall be limited to equipment, components, systems and materials manufactured by the same manufacturer as those base Building components, as specified in the Contract Documents and installed in the Building shell, to which such Tenant Improvement will integrate and connect. For example, the main electrical switchgear located in the basement is manufactured by General Electric. All electrical Tenant Improvement equipment, components and materials (for example subpanels, circuit breakers, etc.) are to be manufactured by General Electric and compatible with the shell Building systems. All Tenant Improvement mechanical control systems are to manufactured by Johnson Controls and be compatible with the base shell Building control system by Johnson Controls, No substitutions shall be permitted.

 

The following documents, establishing minimum standards and specifications, are hereby incorporated into Exhibit B-2

 

B-2.1 Requirements of the Working Drawings by Tenant

 

B-2.2 Contractor Rules and Regulations

 

B-2.3 Plumbing, Mechanical and Electrical Basis of Design prepared by AICES Engineering

 

B-2.4 Mechanical Riser Diagram for the Mechanical and Control Systems for 278 University

 

B-2.5 Single Line Diagram of the Electrical Systems of 278 University, Palo Alto

 

B-2.6 Close-Out Package Requirements

 



 

B-2.1      Requirements of the Working Drawings by Tenant

 

Tenant shall cause Tenant’s Architect to prepare the Working Drawings in accordance with this Exhibit B-2.1. The Working Drawings shall:

 

1.    Be compatible with the design and construction of the Building and the Building Systems and Equipment;

 

2.    Include floor plans (not less than 1/8 inch scale) indicating:

 

(i)                               Quantity, location and type of all partitions.

 

(ii)                            Quantity, location and type of all doors and frames, indicating hardware and providing keying schedule.

 

(iii)                         Quantity, location and type of glass partitions, windows and doors.

 

(iv)                        Critical dimensions necessary for construction.

 

(v)                                  Quantity and location of all electrical items, including without limitation, outlets, switches, telephone outlets, lighting and floor corings.

 

(vi)                               Quantity, location and type of equipment that will require special electrical requirements, with manufacturers’ specifications for use and operation.

 

(vii)                            Reflected ceiling plans including, without limitation, all lighting, vents, diffusers, recessed screens and audio visual equipment.

 

(viii)                         Quantity, location, weight per square foot and description of any equipment or filing system exceeding 50 psf (spread) live load.

 

(ix)                               Requirements for special air conditioning or ventilation-exhaust fans or equipment loads.

 

(x)                                  Quantity, location, type and color of floor covering.

 

(xi)                               Quantity, location, type and color of wall covering.

 

(xii)                           Quantity, location and type of plumbing.

 

(xiii)                        Quantity, location and type of appliances, kitchen equipment and millwork;

 

3.    Include details (not less than 1/4 inch scale) showing:

 

(i)            All millwork with verified dimensions and dimensions of all equipment to be built-in.

 

(ii)                                   Bracing or support of special walls, glass partitions or other features if desired (if not included with the Working Drawings, Landlord’s Engineer, at Tenant’s expense, will design all support or bracing required);

 



 

4.                                       Comply with all applicable laws, including without limitation, the provisions of the ADA;

 

5.                                       Comply with all applicable insurance regulations for a fire resistant Class A building with fire sprinklers;

 

6.                                       Include locations of all improvements including complete dimensions;

 

7.                                       Comply with all building standards as established by the Landlord from time to time in its sole and absolute discretion including, but not limited to:

 

a.               Exit Lighting by Cooper Lighting, Sure-Lites ELX Series, recessed, LED lamps, edgelit and self-powered emergency capabilities.

 

b.               MechoSystems Roller Shade Window Coverings, MechoShade or ElectroShade, fabric and color as selected by Landlord.

 

c.                Mechanical control systems by Johnson Controls, Tridium technology controls and integrated HVAC systems including, but not limited to, valves, actuators, dampers, sensors, thermostats and other control components.

 

d.               Security Systems as specified by Northland Controls, Inc., or such other vendor as selected by Landlord including, but not limited to, a Lenel OnGuard PCS-32ES Server System; Intelligent System Controller LNL-3300; iClass Card Contactless Smart Hexagonal Keys 2052NKNNN; Card Reader iClass RP40 (Black, Universal); CCTV EL-SR 8 Linux Hybrid NVR Appliance 2TB; Alphone Corp. Intercom System GT-DM; and CCTV Camera IP MegaDome, Color, D/N, Vandal Resistant AV2155DN. Tenant shall reimburse Landlord for its prorata share of the cost of the Building house security systems and be responsible for the cost for and installation of all security devices and systems serving and within the Premises.

 

8.                               Confirm and acknowledge that all ceiling heights and dimensions shown on the Landlord’s Contract Documents are estimates only. Landlord shall not be responsible or liable for delivery of the Premises to Tenant with ceiling heights and dimensions as shown on the Contract Documents. Tenant shall verify all actual ceiling heights, dimensions and field conditions and shall not rely on the Contract Documents for such. Tenant shall be solely responsible for installing the tenant improvements within the constraints of the as-built conditions of the Premises in the field upon delivery by Landlord to Tenant.

 

9.                               Confirm that all shaft locations within the Premises are available for Landlord’s future use. Landlord reserves the right to utilize areas designated within the Premises as shaft conditions (either existing or future) in the Contract Documents for vertical penetrations for mechanical, electrical, plumbing and building systems. Tenant shall design all interior improvements so that they do not interfere with Landlord’s future use of ail shaft areas. Tenant shall relocate any tenant improvements that interfere with Landlord’s future use of such shafts areas.

 

10.                        Include any other information reasonably required by Landlord, or Landlord’s Architect and consultants.

 



 

B-2.2      Contractor Rules and Regulations

 

The following Rules and Regulations (“R&R’s”) are to be followed by all contractors, subcontractors, suppliers, consultants and vendors (collectively, “Contractors”) that perform any tenant lease space construction or other construction-related activity (the “Work”) at 278 University Avenue, Palo Alto California (the “Premises”). The term “General Contractor” as used in these R&R’s means any Contractor that contracts directly with a tenant to perform the Work, including providing labor, materials, equipment or services. The term “Subcontractor” as used in these R&R’s means any Contractor retained by a General Contractor directly or indirectly to perform the Work, including providing labor, materials, equipment or services. If a tenant is licensed as a contractor in California and will itself be performing any of the Work, then it will be a “General Contractor” for purposes of these R&R’s and must therefore comply with all requirements of these R&R’s applicable to General Contractors. General Contractors must require their Subcontractors, suppliers and vendors of every tier to comply with the requirements of these R&R’s that apply generally to Contractors and specifically to Subcontractors, and will be responsible for their Subcontractors’, suppliers’ and vendors’ failure to do so.

 

I. ADMINISTRATION OF CONTRACTS

 

A.                                     Modifications to these R&R’s will be effective only if they are initialed by authorized representatives of both the General Contractor and Landlord. The R&R’s cannot be amended by implication, oral agreements, actions, inactions, course of conduct, or implied waiver.

 

B.                                     Each General Contractor must maintain and provide to Landlord, and by written agreement, must require each of its Subcontractors to maintain the insurance and the evidence of insurance required in the tenant’s lease. General Contractor shall provide Builder’s Risk Insurance for the Work.

 

C.                                     Contractor shall provide a single contact person. That person will be responsible to see that the Contractor complies with these R&R’s. Should that person be replaced, a replacement person shall be designated by the Contractor.

 

D.                                     Landlord will have no responsibility to plan, contract, schedule and execute contracts involving furniture, moving companies, telephone and telecommunication equipment, cabling and termination, computer installation and tenant signage. Promptly upon Landlord’s request, all Contractors (including consultants, suppliers and vendors directly contracted with a tenant and working within the Premises), must furnish to Landlord a certificate of insurance and/or other evidence of the insurance.

 

E.                                      General Contractor shall be responsible for obtaining proper permits for all Work including, without limitation, prior to inspection of fire/life safety system related alterations. Promptly upon request, such permits must be submitted to the Landlord’s designated representative as set forth in the tenant’s lease of the Premises (“Landlord’s Representative”) during or prior to inspection of the Work.

 


 

II PRE-CONSTRUCTION AND BIDDING REQUIREMENTS

 

A.                                     General Contractor shall be responsible for verifying all patent conditions affecting the scope of the Work prior to submitting proposals.

 

B.                                     General Contractor shall include in its proposals the following costs: additional security, trash removal, window removal, and any other use of the building services associated with the scope of Work.

 

C.                                     General Contractor shall provide for any necessary OSHA approved safety procedures, instruction, and equipment for their workers and Subcontractors.

 

D.                                     Although General Contractor must comply with these R&R’s, General Contractor is responsible for and has control over (i) means, methods, techniques and procedures for me Work and (ii) initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Work. General Contractor shall take all prudent precautions for safety and security of, and shall provide protection to prevent damage, injury or loss to, persons or property, including employees performing the Work, other persons that may be affected by the Work, the Work itself, and any other personal or real property that may be affected by the Work.

 

E.                                      General Contractor shall be responsible for the acquisition, notification and supervision of permits required for the Work. General Contractor is required to schedule, be available and resolve any notifications acquired as a result of inspections required by any government agencies whose jurisdiction includes the Premises.

 

F.                                       A pre-construction walk-through with General Contractor and Landlord’s Representative shall be arranged so as to note any pre-existing conditions within and to the areas affecting the scope of Work.

 

G.                                     Acquisition of City of Palo Alto Building Department “variances” requires approval by Landlord’s Representative (which approval shall not be unreasonably withheld, conditioned or delayed) after collaboration between General Contractor, the approved architect and/or (as applicable) engineer for the Work and governmental agencies whose jurisdiction includes the Premises.

 

H.                                    General Contractor shall include all costs associated with the modifications of the fire/life safety system that may he required by the scope of Work. This includes development of plans, constructing fire ratings of walls, floor, ceiling and door assemblies, as well as any changes to the mechanisms of the fire control center system and the automatic sprinkler system.

 

I.                                         General Contractor shall at its own expense promptly address and resolve any correction of defects in the Work within one year after substantial completion of the Work.

 



 

J.                                         General Contractor shall include a wash and (possible) re-lamp fee of all lighting fixtures within the area affected by the scope of Work, General Contractor shall specify as to whether this is included or an alternate within the proposal.

 

K.                                    General Contractor shall include the cost of removing and correcting exposed and concealed items caused by the Work, abandoned or non-essential equipment caused by the Work, including but not limited to any electrical and communication wiring, inoperative plumbing devices, receptacles, misc. equipment, empty conduit, etc., which exists in affected areas of the scope of Work.

 

L.                                      General Contractor shall include a one-time touch up paint assignment on affected areas, including wood surface doors, for after tenant move-in. The purpose of this is to fix incidental damage incurred from moving of furnishings and shall be completed within ten (5) business days after Tenant move-in or renewed occupancy of affected area.

 

M.                                  No storage of flammable substances outside of normal and customary construction materials will be allowed in any of the buildings on the Premises unless approved by Landlord’s Representative (which approval shall not be unreasonably withheld, conditioned or delayed) and in accordance with approved building codes and regulations.

 

N.                                     General Contractor shall be required to insure access to all necessary mechanical and electrical equipment after completion of the scope of Work. This includes all HVAC mixing boxes, control dampers, shut off valves, fire dampers, and any other item that pertains to maintenance and serviceability of building equipment.

 

O.                                     General Contractor shall use high quality workmanship practices that shall include proper wall preparation, use of sealers, primers, etc. for protection of any finishes within the scope of Work.

 

P.                                       Landlord’s Representative shall have the right to suspend a Contractor’s Work if such Work is presenting or may present a danger to life, safety or property, or in an emergency situation.

 

Q.                                     Contractors shall be licensed to the extent required by California law, and shall maintain such license in good standing so long as performing any of the Work.

 

III. BUILDING ACCESS AND FACILITIES COORDINATION

 

A.                             Landlord’s Representative shall reasonably specify the location of roll-off containers for construction trash and debris.

 

B.                             General Contractor shall notify Landlord’s Representative of any hazardous materials (other than those contained in standard tenant improvement construction materials) being used for the scope of Work and storage provisions for such products. Such use must have prior written consent from Landlord’s Representative before the introduction of such materials into the Premises.

 



 

C                                        General Contractor shall maintain an on-site superintendent who will provide direct supervision of all of the Work being performed, including the delivery of materials. Such supervisory personnel shall be fully empowered to coordinate, respond to and authorize Subcontractors to perform such of the Work as necessary to enable the scope of Work.

 

IV. FINISH PROTECTION AND HOUSEKEEPING

 

A.                                     General Contractor shall provide for reasonable removal of all debris that arises during the course of construction in affected areas. Building trash receptacles and dumpsters shall not be used by Contractor.

 

B.                                     Contractor shall keep work areas in a reasonably clean and orderly condition. Affected areas shall be regularly swept and debris removed during the course of the Work.

 

C.                                     Discarded, open food containers and related debris shall be disposed of properly at the Premises.

 

D.                                     General Contractor may be billed for any additional cost as a result of the use of restroom sinks, floor sinks or other fixtures to fill buckets, make paste, wash brushes, etc.

 

E.                                      Elevators are not to be used by Contractors and General Contractor. Access to the stairwells will be provided.

 

F.                                       Neither Landlord nor Landlord’s Representative assumes any responsibility for trash containers stored outside for use by the Contractors. It is the responsibility of the General Contractor to monitor and resolve any usage issues with their trash containers. Trash is to be placed in the containers and containers are to be emptied as often as reasonably necessary.

 

G.                                     At the end of any given workday, all lights in the area affected by the Work must be turned off. General Contractor’s electrician shall provide means of accomplishing this at all times.

 

H.                                    General Contractor may, at the request of the Landlord’s Representative, be required to stock and keep clean the restrooms on the floor or floors where they are working. If above average wear and tear on designated restrooms is observed by Landlord’s Representative, Contractor will be required to return the restroom to its prior condition.

 

V. CONSTRUCTION REQUIREMENTS

 

A.                                     Unused floor penetrations within the scope of Work must be properly filled prior to covering. The accepted procedure for filling penetrations up to 2” in diameter requires beveling the edge of the penetration prior to pouring concrete. For larger penetrations or where grouping of holes requires, the same process plus backing from below the floor needs to occur.

 



 

B.                                     Any penetrations to be made in structural steel beams are to be approved, in advance by a Structural Engineer chosen by Landlord’s Representative and permitted by local building official and/or the State of California, as applicable.

 

C.                                     Landlord’s Representative may reasonably request that all structural analysis be paid for by Tenant, should questionable loads be shown to affect the floors of the scope of Work.

 

D.                                     Any attachment or intrusion into the skin of any of the building or roofing system shall be drawn in detail and submitted to Landlord’s Representative for review and approval (which approval shall not be unreasonably withheld, conditioned or delayed, but in any event subject to the provisions of the Lease with respect to approvals required in connection with penetrations of the roof membrane), prior to commencement of the Work. In addition written verification will be required to assure no warranties may be voided from any of the Work affecting the skin or roofing system of the building. Tenant shall use Landlord’s selected subcontractors to perform any and all Work that penetrates the Building skin, waterproofing and/or roofing membrane to insure that all base building warranties remain in full force and effect.

 

E.                                      Contractor shall make sure that any extra ceiling tiles, pieces, extra debris, non-essential metal, etc. is removed from the space above ceiling tiles, prior to ceiling tile being installed.

 

F.                                       As good workmanship practice, Contractor shall have all wall plates, thermostats, and any other like devices removed from their location prior to paint and wall preparation. When paint or wall covering is complete, devices can be reinstalled.

 

G.                                     Hot work may only be done on the Premises by person(s) who are trained to local safety standards. Any such hot work will comply with all permit requirements, and the hot work may be overseen by Landlord’s Representative. Any deviations from standard safety procedures with respect to hot work will result in immediate dismissal from the project site. Safety and procedural compliance is essential.

 

H.                                    A hot work permit is required for any temporary operation involving open flames or which produces heat and/or sparks. This includes, but is not limited to: brazing, cutting, grinding, soldering, torch applied roofing, welding and all other portable torch and hot gun uses. Hot work permits are logged by Landlord’s Representative.

 

Contractor shall abide by any decision of Landlord’s Representative that a ‘fire watch’ be arranged with additional personnel. Personnel must be able to supervise and activate alarms on the fire control center, use extinguishing agents, and may be required to observe the work area four (4) hours after Work completion.

 

J.             All approved gas and oxygen canisters shall be properly chained and supported to

 



 

eliminate all potential hazards. At the completion of use, said containers shall be promptly removed from the building.

 

K.            No gasoline powered devices shall be permitted within the building.

 

L.                                      General Contractor shall be required to keep at least four (4) currently certified 10 pound ABC fire extinguishers in the area of the scope of Work in the building during construction.

 



 

VI. FIRE/LIFE SAFETY SYSTEMS

 

A.                                     Failure to notify and coordinate with Landlord’s Representative regarding any Work on any fire/life safety system, including the fire control center and fire sprinkler equipment, may result in the automatic dispatch of fire trucks, General Contractor shall bear responsibility for any monetary costs incurred by the dispatching of city emergency services or Work stoppage that result from a failure to notify Landlord’s Representative in advance.

 

B.                                     General Contractor can choose to ‘cap’, protect any smoke detectors in the vicinity of the scope of Work during construction in order to mitigate nuisance activation by dust or smoke byproducts, At the end of each day, all ‘capped’ smoke detectors shall be uncovered and proper operation verified by the General Contractor.

 

C.                                     Junction boxes for fire/life safety devices shall be painted red to indicate their use.

 

D.                                     Only plenum rated cable shall be used where communication/data or other low-voltage conductors are installed in the return air plenum out of conduit.

 

E.                                      For Fire Safety and proper evacuation procedures, fire rated doors are never to be propped open or blocked from automatically closing.

 

F,                                       General Contractor shall be responsible for pre-testing the fire/life safety system and insuring that it meets permit requirements.

 

VII. MECHANICAL AND ELECTRICAL SYSTEMS

 

A.                                     All duct runs to all ceiling diffusers (registers) shall include a manual volume damper for each register outlet, installed as close to the mixing box as feasible for isolating the respective register. Registers shall be thoroughly cleaned prior to project turnover.

 

B.                                     General Contractor shall maintain a maximum 25 feet in length from the mixing box to diffuser, and may use aluminum flex ductwork with (min.) 1.5” insulation. Only the last 7 feet of any duct (from mixing box to register) can be of fiberglass, flex type duct material.

 

C.                                     General Contractor shall accept responsibility for purification and testing of domestic water, piping and dispensing fixtures and insure that systems are in accordance with current ASHRAE guidelines. These procedures are required especially when altered with the use of soldering.

 



 

D.                                     Landlord requires all Contractors to use high quality workmanship practices and use non-flexible conduit, properly bent and attached wherever possible.

 

E.                                      In the event that temporary power connection is required, such connections shall be made by a licensed and insured electrical contractor and General Contractor shall give Forty-eight (48) hours prior notice to Landlord’s Representative.

 

VIII. MOVE-IN PROCEDURE

 

A.                                     Prior to move-in, Tenant and General Contractor must obtain and provide a temporary or final certificate of occupancy or other authorization allowing Tenant to occupy the Premises.

 

B.                                     Tenant shall coordinate all move-in activities with Landlord’s Representative.

 

C.                                     A designated representative of Tenant and/or moving company will be present at all times during the move-in.

 

D.                                     Movers shall protect all surfaces on the interior and exterior of the Building prior to moving Tenant possession into the Building. All flooring shall be covered with Masonite. Elevators shall have Masonite floor protection and wall/ceiling protection. After the move, movers shall breakdown and remove all boxes and packaging after the move. Such packaging must be removed from Premises.

 

E.                                      Heavy objects loaded onto the freight elevators (if any) must be within elevator load limits and with sturdy floor protection.

 

F.                                       Tenant’s moving company, vendors, and service companies must meet Landlord’s reasonable the insurance requirements.

 

G.                                     Telephone, security and internet installation and service is the Tenant’s responsibility and expense.

 

IX. CLOSE-OUT AND COMPLETION

 

A.                                     A completion package consisting of all items listed in Exhibit B-2.6 attached hereto, shall be turned over to Landlord’s Representative prior to final payment by either Landlord or Tenant.

 

B.                                     “As-Built” drawings must be an accurate record of all items altered from original drawings and include pertinent written material (i.e., appliances, finishes, field conditions, etc.). Such drawings could be updated renderings or could show corrections in red ink and be initialed and dated by the General Contractor’s supervisor.

 

C.                                     Failure to turn over necessary documentation described in Exhibit B-2.6 attached hereto can delay disbursement of Tenant’s allowance or payment to the General Contractor.

 



 

X. PROVISOS

 

A.                                     The rights of Landlord (including rights of Landlord’s Representative) under these R&R’s are solely for Landlord’s benefit, and Landlord has no obligation to exercise any rights in favor of Tenant, any Contractor or any other person or entity.

 

B.                                     The failure of Landlord or Landlord’s Representative to insist upon compliance with any requirement of these R&R’s will not constitute a waiver of such requirement. Any waiver by Landlord or Landlord’s Representative will be effective only if made specifically and in writing by Landlord’s Representative, and will not be implied. A proper written waiver by Landlord’s Representative will only be applicable to the specific provision and instance to which it is related, and will not be deemed to be a continuing or future or broader waiver.

 

C.                                     Notwithstanding any rights granted to Landlord (including rights of Landlord’s Representative) under these R&R’ s to review and approve documentation submitted by Contractor or the Work performed by Contractor, no such review or approval will deemed to be Landlord’s acceptance of, or assumption of responsibility for, any defect, deviation or inadequacy in such documentation or the Work.

 



 

B-2.3 PLUMBING, MECHANICAL AND ELECTRICAL BASIS OF DESIGN PREPARED BY ACIES ENGINEERING FOR 278 UNIVERSITY, PALO ALTO CALIFORNIA

 

ATTACHED

 


 

 

EXHIBIT B-2.3

 

278 UNIVERSITY AVE., PALO ALTO

 

PLUMBING, MECHANICAL AND ELECTRICAL BASIS OF

DESIGN

 

PLUMBING SYSTEM DESCRIPTION

 

The plumbing system Will include plumbing fixtures, sanitary, vent, cold and hot water, and gas piping. The design for this system includes all piping within the building.

 

DOMESTIC HOT AND COLD WATER PIPING

 

· Domestic water system will be complete with isolation valves (for maintenance purposes) and water hammer arrestors. Shut-off valves shall be located in accessible locations.

 

· Sizes shall be based on number of fixture units, and demand load curves in the California Plumbing Codes.

 

· Friction loss; 5 psi per 100 feet of pipe.

 

· Maximum allowable water velocity for cold water: 8 feet per second inside buildings.

 

· Maximum allowable water velocity for hot water: 5 feet per second inside buildings.

 

· Expansion and contraction of all hot water piping shall be considered in the design.

 

· The tenant space is provided with 1” cold water and 3/4” hot water valved stub-outs located above ceiling.

 

· Domestic hot and cold water supply for each tenant space shall be provided with sub-meters (flow meters).

 

· Domestic water piping will be type L copper for above grade, and type K copper for below grade.

 

· All equipment and piping shall be seismically braced and anchored.

 

SOIL, WASTE AND VENT PIPING

 

· Soil, waste and vent piping will be no-hub cast iron.

 

· Sanitary waste and vent system complete with cleanouts and traps. Cleanouts locations to be reviewed by Landlord.

 

· Trap primers will be placed near the floor drain and floor sink locations in order to prevent trap seal loss and avoid sewer fumes.

 

· Waste piping will be installed with a minimum slope of 1/4” per foot.

 

111W Evelyn Avenue, Suite 301, Sunnyvale, CA 94086 phone: (408) 522-5255 fax: (408) 522-5260 email: info@acies.net

 



 

· A 4” waste and 2” vent stub-outs axe provided for the tenants use.

 

PLUMBING FIXTURES

 

Tenants shall provide high efficient plumbing fixtures as required per LEED credit WE 3 Water Use Reduction.

 

· Plumbing fixtures will be California State and CalGreen approved for conservation and for handicapped regulations.

 

· Tank type water closets shall be of pressure-assisted type.

 

· ADA fixtures and control valves will be provided as required.

 

· The plumbing fixtures will be high efficient type with the following flow rates:

 

·     Lavatory faucets - 0.5 gpm

·     Sink faucets — 1.8 gpm

·     Gravity tank-type water closets — 1.28 gpf

·     Flushometer valve water closets — 1.28 gpf

·     Urinals — 1/8 gpf

 

MECHANICAL SYSTEM DESCRIPTION

 

WATER-SOURCE HEAT-PUMPS WITH COOLING TOWER

 

The water-source heat-pumps use cooling tower for heat rejection.

 

System components:

 

The forced-air water-source heat-pumps system with the cooling tower consists of the following components:

 

1.                    The water-source heat-pump (WSHP-1.1 - Florida Heat Pump EP012 and WSHP-0.1 - Trane GEH0061) as a stand-alone air conditioning unit that can be used for heating and cooling and it is utilizing condensing water as the medium for heat rejection or absorption. The unit consists of supply fan, refrigerant compressor, reversing valve, direct-expansion cooling coil and water cooled condenser mounted inside the insulated sheet-metal enclosure. (The “coil” is refrigerant-to-air heat exchanger — can be used for heating or cooling of the supply air). The temperature of the supply air (or the room temperature) is controlled by starting and stopping (cycling) the compressor and by energizing the reversing valve to switch to the heating (reverse) mode.

 

2.                    Condensing water pumps (CWP-1A, 1B — Bell & Gossett, B-224.2H, Series 1510 2AC) and distribution piping: Circulating pumps provide circulation of the condensing water through the cooling tower and water-source heat pumps. Cooling tower (CT-1 — EVAPCO LRWB 5-7J9-1): is using cooling effect of water evaporation to cool the condensing water. The cooling tower is located on the roof.

 

3.                    Heating boiler (B-1 - MACH C-300): If the water-source heat pumps are running in the heating mode, there will be extracting the heat from the condensing water and the temperature of the condensing water will drop. The hot water from the boiler will be injected to the condensing water

 



 

to maintain the water temperature above 60°F. The boiler is located next to the cooling tower, and uses the natural-gas as the fuel.

 

4.                    Temperature Controls and water treatment system: The condensing water temperature control system sequences and modulates the cooling tower and heating boiler to maintain the condensing water temperature within 60°F to 90°F. The water treatment system is using the chemical or non-chemical means of water treatment to prevent deposits of calcium-carbonate inside the cooling tower, extending the life-cycle and minimizing the maintenance of the cooling tower.

 

FRESH AIR SUPPLY SYSTEM

 

System Description

 

The fresh air is supplied to the building through ERV (energy recovery ventilator, ERV-1 — DAIS D5R-FSE) that consists of two fans (supply and exhaust fan) and air-to-air plate heat exchanger. Both fans are controlled, by variable speed drives. On each floor the fresh air from ERV is delivered through the VAV box. The VAV box (TITUS ESV10) is used to measure and control the amount of fresh air supplied to each floor.

 

FUTURE TENANT REQUIREMENTS

 

· The Water Source heat pumps (WSHP - Florida Heat Pump EP) shall have a minimum 19 EER and 5.35 COP rating compliant with requirements of 2010 Cal green.

 

· The Water Source heat pump unit shall be equipped with motorized shut-off valve to stop condensing water flow when the unit’s compressor is not running.

 

· The Water Source heat-pumps shall he controlled by BacNet compatible networked thermostat “Johnson Controls” TEC2602 for heat-pump application

 

· All the tenant’s HVAC controls shall be tied-in (networked) into the building’s BMS using BacNet communication protocol.

 

· The outside-air delivery VAV box (TITUS ESV) shall be set to operate in the constant volume mode and be set to deliver minimum O.A. required per T24 for particular tenant. If the CO2 monitor detects concentrations of CO2 above 400 ppm, the supply air flow rate shall be re-set to higher level (required for “LEED” enhanced ventilation).

 

· The VAV box shall be controlled by Johnson Controls Tridium VMA-16 controller with Tridium NS network CO2 monitor.

 

· The tenant’s electrical power usage shall be monitored by power meter integrated into building BMS. See electrical sections.

 

· The usage of domestic cold and domestic hot water shall be monitored by BMS system through control input module “Johnson Controls” IOM1711 by connecting pulse output from water meter. (See plumbing for sections and specifications)

 

· Each floor (tenant) has an allowance for maximum 40 GPM of condensing water usage corresponding to approximately 15 tons of cooling. The landlord has to approve any condensing water usage exceeding the limit.

 



 

ELECTRICAL SYSTEM DESCRIPTION

 

ELECTRICAL POWER DISTRIBUTION SYSTEM

 

Electrical service switchboard is rated 1200A, 120/208V, 3 phase, 4 wire, 42,000 AIC and is located in the main electrical room in the basement. The tenant’s spaces shall be separately metered, and capacities and services per floor are as follows:

 

·        First Floor:

 

· (1) 400A meter for retail/café/light food service tenant

 

· (1) 200A meter for retail tenant

 

·        Second floor:

 

· (I) 400A meter for retail/café/light food service tenant

 

·        Third floor:

 

· (1) 200A meter for office tenant

 

·     Fourth floor:

 

· (1) 200A meter for office tenant

 

In the main switchboard, there are spaces for two additional rated 200A, and there are spare 2” empty conduits stubbed to each floor in case if additional meters are required for further floor separations.

 

Main Switchboard “MS” is GE Spectra Series switchboard. The circuit breakers for tenant spaces are as follows:

 

· 400 Amps breakers are GE SGHA4 series

 

· 200 Amps breakers are GE SFHA series.

 

All tenant’s panels must be manufactured by GE; no alternate products will be approved. If series-rated combination system is used, all tenant’s panels must be UL listed as series-combination rated system with the main switchboard breakers used above and rated for available short circuit current of 42,000 Amps.

 

The power conduits are stubbed to each floor into accessible ceiling space. Tenants shall extend the conduits designated for their use to their respective panels and shall provide conductors for entire run.

 

Tenants shall provide sub-meters for monitoring of power usage and as required per LEED credit EA 5.2 “Measurement and Verification - Tenant Sub-metering”. Tenants shall design their electrical distribution systems to allow separate sub-metering of lighting and HVAC loads. The sub-meters shall be compatible with BACnet MS/TP Communication Protocol for integration in building sub-metering and power monitoring system. Sub-meters shall be E-Mon D-Mon Green Class with BACnet MS/TP protocol, model number as follows:

 

·       For 120/208V, 3 phase, 100A service: E50-208100-J03-N-KIT

 

·       For 120/208V, 3 phase, 200A service: E50-208200-J03-N-KIT

 

·       For 120/208 V, 3 phase, 400A service: E50-208400-J03-N-KIT

 

Within the space, tenant’s contractor shall install all power wiring in raceways. The use of MC Cable is allowed for branch circuit concealed in the ceiling, walls, and partitions, No aluminum conductors are allowed.

 



 

PHONE, FIRE ALARM AND DATA DISTRIBUTION SYSTEMS

 

The Minimum Point of Entry (MPOE) is located in the main electrical room, in the basement. From there, there are (3) 2” empty conduits stubbed to each floor. Tenant’s shall extend these conduits to their phone system distribution point, and shall provide cabling for entire runs.

 

Per each floor, there are (2) 3” conduits subbed for fire alarm system. Tenants shall provide devices compatible with building fire alarm system, and shall integrate with building fire alarm system. Tenant is required to use base building fire alarm system design/built contractor; no other contractors are allowed to be used.

 

For data system cabling and distribution, there is IT room provided in the basement for tenant’s use. Tenants shall have option of installing their equipment in this room and installing cabling from this equipment to their floor. There are (3) 3” empty conduits per each floor for tenant’s system cabling between IT room in the basement and their floors.

 

LIGHTING

 

Tenants shall provide interior lighting in compliance with city of Palo Alto ordinance which requires that interior lighting allowance betters Title 24 by 15%.

 

Tenants shall provide interior Lighting Controls Panel (LCP) that is California Energy Commission (CEC) certified and Title 24 compliant Lighting controls panel shall allow integration with base Building Automation System (BAS) using communication protocol BACnet MS/TP. LCP shall be Watt Stopper LIB8, LIB24 or LIB48 as required per tenant’s number of interior lighting zones.

 


 

B-2.4      MECHANICAL RISER DIAGRAM FOR THE MECHANICAL AND CONTROL SYSTEMS FOR 278 UNIVERSITY, PALO ALTO CALIFORNIA

 

ATTACHED

 



 

 



 

B-2.5      SINGLE LINE DIAGRAM OF THE ELECTRICAL SYSTEMS FOR 278 UNIVERSITY, PALO ALTO CALIFORNIA

 

ATTACHED

 



 

 



 

B-2.6      CLOSE-OUT PACKAGE REQUIREMENTS

 

CLOSE-OUT PACKAGE REQUIREMENTS

 

The General Contractor will be required to provide a closing package (in both hard copy and one electronic pdf format) to Landlord to include, at a minimum, the following items:

 

(a)                          General Contractor’s and all subcontractors’ name, address and current contact information.

 

(b)                          Signed-off final punch list from Tenant, the Landlord’s Representative, and the architect or engineer (as applicable) for the Work.

 

(c)                           All unconditional closing lien releases for the Work.

 

(d)                          Warranty letter from the General Contractor and from the major Contractors/Subcontractors performing the Work including the major plumbing, electrical, mechanical and fire/life safety subcontractors, with agreed date.

 

(e)                           Manufacturer’s warranties, guarantees and Operations and Maintenance Manual (three (3) copies).

 

(f)                            Stamped set of city building department approved permitted drawings.

 

(g)                           As-Built drawings for architectural, electrical, mechanical, fire sprinkler, fire/life safety, and any other applicable subcontractor As-Builts (three (3) hard copies and two electronic copies in pdf and CAD format.)

 

(h)                          Air Balance Report (three copies).

 

(i)                              Three (3) copies of any required documents from City of Palo Alto, including Temporary and/or final Certificates of Occupancy and a final inspection record card (three copies)

 



 

EXHIBIT C

 

COMMENCEMENT DATE MEMORANDUM

 

THIS COMMENCEMENT DATE MEMORANDUM (this “ Memorandum ”) is made and entered into effective as of                                                                , 2012, by and between 278 UNIVERSITY INVESTORS, LLC, a California limited liability company (“ Landlord ”) and INVITAE CORPORATION, a Delaware corporation (“ Tenant ”) .

 

RECITALS:

 

A.            Landlord and Tenant entered into that certain Lease dated as of                                                                          , 2012 (the “ Lease ”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, as described in the Lease, in that certain Building located at 278 University Avenue, Palo Alto, California.

 

B.            Except as otherwise set forth herein, all capitalized terms used in this Amendment shall have the same meaning as such terms have in the Lease.

 

C.            Landlord and Tenant desire to confirm the Lease Commencement Date and the Expiration Date of the Lease Term, as hereinafter provided.

 

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.         Confirmation of Dates . The parties hereby confirm:

 

(a)           The Lease Commencement Date is

 

(b)           The Rent Commencement Date is

 

(c)           The Lease Expiration Date is

 

2.         No Further Modification . Except as set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

 

IN WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and year first above written.

 



 

 

“Landlord”:

 

 

 

278 UNIVERSITY INVESTORS, LLC,

 

a California limited liability company

 

 

 

By:

 

 

 

Name:

 

 

 

Its:

 

 

 

 

 

 

“Tenant”:

 

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

By:

 

 

 

Name:

 

 

 

Its:

 

 


 

EXHIBIT D

 

RULES AND REGULATIONS

 

Tenant shall faithfully observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Building.

 

1.           Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord’s prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Two keys will be furnished by Landlord for the Premises, and any additional keys required by Tenant must be obtained from Landlord at a reasonable cost to be established by Landlord.

 

2.           All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises, unless electrical hold backs have been installed.

 

3.           Landlord reserves the right to close and keep locked all entrance and exit doors of the Building during such hours as are customary for comparable buildings in the vicinity of the Building. Tenant, its employees and agents must be sure that the doors to the Building are securely closed and locked when leaving the Premises if it is after the normal hours of business for the Building. Any tenant, its employees, agents or any other persons entering or leaving the Building at any time when it is so locked, or any time when it is considered to be after normal business hours for the Building, may be required to sign the Building register when so doing. After-hours access by Tenant’s authorized employees may be provided by card-key access or other procedures adopted by Landlord from time to time; Tenant shall pay for the costs of all access cards provided to Tenant’s employees and all replacements thereof for lost, stolen or damaged cards. Access to the Building and/or the Real Property may be refused unless the person seeking access has proper identification or has a previously arranged pass for such access. Landlord and its agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building and/or the Real Property of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building and/or the Real Property during the continuance of same by any means it deems appropriate for the safety and protection of life and property.

 

4.           Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building. Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property in any case. All damage done to any part of the Building, its contents, occupants or visitors by moving or maintaining any such safe or other property shall be the sole responsibility of Tenant and any expense of said damage or injury shall be borne by Tenant.

 

5.           Except for normal deliveries of packages in the ordinary course of business, no furniture, freight, packages, supplies, equipment or merchandise will be brought into or removed from the Building or carried up or down in the elevators, except upon prior notice to Landlord, and in such manner, in such specific elevator, and between such hours as shall be designated by Landlord. Tenant shall provide Landlord with not less than 24 hours prior notice of the need to utilize an elevator for any such purpose, so as to provide Landlord with a reasonable period to schedule such use and to install such padding or take such other actions or prescribe such procedures as are appropriate to protect against damage to the elevators or other parts of the Building.

 

6.            Landlord shall have the right to control and operate the public portions of the Building and the Real Property, the public facilities, the heating and air conditioning, and any other facilities furnished for the common use of tenants, in such manner as is customary for comparable buildings in the vicinity of the Building.

 



 

7.           The requirements of Tenant will be attended to only upon application at the management office of the Building or at such office location designated by Landlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord.

 

8.           Tenant shall not disturb, solicit, or canvass any occupant of the Building or the Real Property and shall cooperate with Landlord or Landlord’s agents to prevent same.

 

9.           The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or agents, shall have caused it.

 

10.         Tenant shall not overload the floor of the Premises. Tenant shall not mark, drive nails or screws, or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof without Landlord’s consent first had and obtained; provided, however, Landlord’s prior consent shall not be required with respect to Tenant’s placement of pictures and other normal office wall hangings on the interior walls of the Premises (but at the end of the Term, Tenant shall repair any holes and other damage to the Premises resulting therefrom).

 

11.         Except for vending machines intended for the sole use of Tenant’s employees and invitees, no vending machine or machines of any description other than fractional horsepower office machines shall be installed, maintained or operated upon the Premises without the written consent of Landlord.

 

12.         Tenant shall not use any method of heating or air conditioning other than that which may be supplied by Landlord, without the prior written consent of Landlord.

 

13.         Tenant shall not use or keep in or on the Premises, the Building or the Real Property any kerosene, gasoline or other inflammable or combustible fluid or material. Tenant shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in or on the Premises, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building or the Real Property by reason of noise, odors, or vibrations, or interfere in any way with other tenants or those having business therewith.

 

14.         Tenant shall not bring into or keep within the Building, the Real Property or the Premises any animals, birds, bicycles or other vehicles.

 

15.         The Premises shall not be used for lodging or for any improper, objectionable or immoral purposes.

 

16.         No cooking shall be done or permitted by Tenant on the Premises, nor shall the Premises be used for the storage of merchandise. Notwithstanding the foregoing, Underwriters’ laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages, provided that such use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations, and does not cause odors which are objectionable to Landlord and other tenants.

 

17.         Landlord will approve where and how telephone and telegraph wires and other cabling are to be introduced to the Premises. No boring or cutting for wires shall be allowed without the consent of Landlord. The location of telephone, call boxes and other office equipment and/or systems affixed to the Premises shall be subject to the approval of Landlord.

 

18.         Landlord reserves the right to exclude or expel from the Building and/or the Real Property any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations.

 



 

19.         Tenant, its employees and agents shall not loiter in the entrances or corridors, nor in any way obstruct the sidewalks, lobby, halls, stairways or elevators, and shall use the same only as a means of ingress and egress for the Premises.

 

20.         Tenant shall not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to ensure the most effective operation of the Building’s heating and air conditioning system, and shall refrain from attempting to adjust any controls.

 

21.         Tenant shall store all its trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city in which the Building is located without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided for such purposes at such times as Landlord shall designate. Tenant shall cooperate with Landlord to achieve full compliance with any recycling or waste management requirements of the City of Palo Alto.

 

22.         Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.

 

23.         Tenant shall assume any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed, when the Premises are not occupied.

 

24.         No awnings or signage shall be attached to the outside walls of the Building without the prior written consent of Landlord. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises without the prior written consent of Landlord and, as a condition to consent to installation of any blinds or window coverings, Landlord may require, among other things, that Tenant install Building standard blinds or window coverings. The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or other articles be placed on the windowsills. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent and/or of a quality, type, design and bulb color approved by Landlord.

 

25.         The washing and/or detailing of or, the installation of windshields, radios, telephones in or general work on, automobiles shall not be allowed on the Building.

 

26.         Food vendors shall be allowed in the Building upon receipt of a written request from the Tenant. The food vendor shall service only the tenants that have a written request on file in the management office of the Building. Under no circumstance shall the food vendor display their products in a public or Common Area including corridors and elevator lobbies. Any failure to comply with this rule shall result in immediate permanent withdrawal of the vendor from the Building.

 

27.         Tenant must comply with requests by the Landlord concerning the informing of their employees of items of importance to the Landlord.

 

28.         Tenant shall not permit any smoking within any portion of the Building and shall comply with any non-smoking ordinance adopted by any applicable governmental authority.

 

29.         Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Building and/or the Real Property. Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord’s judgment may from time to time be necessary for the

 



 

management, safety, care and cleanliness of the Premises, Building and the Real Property, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord shall not be responsible to Tenant or to any other person for the nonobservance of the Rules and Regulations by another tenant or other person. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy of the Premises.

 



 

expended. Tenant’s obligations under this Section 19.3 shall survive the expiration or sooner termination of the Lease Term.

 

19.4        Sublessees of Tenant . Whether or not Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this Article 19 , Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest in such subleases, licenses, concessions or arrangements. In the event of Landlord’s election to succeed to Tenant’s interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.

 

19.5        Waiver of Default . No waiver by Landlord of any violation or breach by Tenant of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other or later violation or breach by Tenant of the same or any other of the terms, provisions, and covenants herein contained. Forbearance by Landlord in enforcement of one or more of the remedies herein provided upon a default by Tenant shall not be deemed or construed to constitute a waiver of such default. The acceptance of any Rent hereunder by Landlord following the occurrence of any default, whether or not known to Landlord, shall not be deemed a waiver of any such default, except only a default in the payment of the Rent so accepted. No endorsement or statement on any check or any letter accompanying any payment of Base Rent or such other sums shall be deemed an accord and satisfaction, and Landlord may accept any such check or payment without prejudice to Landlord’s right to receive payment of the balance of such rent and/or other sums, or Landlord’s right to pursue Landlord’s remedies.

 

19.6        Efforts to Relet . For the purposes of this Article 19 , Tenant’s right to possession shall not be deemed to have been terminated by efforts of Landlord to relet the Premises, by its acts of maintenance or preservation with respect to the Premises, or by appointment of a receiver to protect Landlord’s interests hereunder. The foregoing enumeration is not exhaustive, but merely illustrative of acts which may be performed by Landlord without terminating Tenant’s right to possession.

 

19.7        Landlord Default . Landlord shall not be in default hereunder unless it fails to cure any breach within thirty (30) days after notice from Tenant, provided however, if the nature of such breach is such that the same cannot reasonably be cured within a thirty (30) day period, Landlord shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure said default as soon as possible. Before exercising any remedies for a default by Landlord, Tenant shall give notice and a reasonable time to cure to any lender of Landlord of which Tenant has been notified.

 

ARTICLE 20

 

SECURITY DEPOSIT

 

Concurrent with Tenant’s execution of this Lease, Tenant shall deposit with Landlord a security deposit (the “ Security Deposit ”) in the amount set forth in Section 10 of the Summary. The Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the Lease Term. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, Landlord may, but shall not be required to, use, apply or retain all or any part of the Security Deposit for the payment of any Rent or any other sum in default, or for the payment of any amount that Landlord spends or becomes obligated to spend by reason of Tenant’s default, or to compensate Landlord for any other loss or damage that Landlord may suffer by reason of Tenant’s default. If any portion of the Security Deposit is so used or applied, Tenant shall, within five (5) days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount, and Tenant’s failure to do so shall be a default under this Lease. The Security Deposit, or any balance thereof not applied to cure a default of Tenant as permitted hereby, shall be returned to Tenant, or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder, within thirty (30) days following the expiration of the Lease Term. Tenant shall not be entitled to any interest on the Security Deposit. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, and all other provisions of law, now or hereafter in force, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it

 

26



 

being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant.

 

ARTICLE 21

 

COMPLIANCE WITH LAW

 

Notwithstanding any other provision of this Lease to the contrary, Tenant, at its expense, shall comply with all Laws relating to the operation of its business at the Premises and Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way violate or conflict with any Laws now in effect or hereafter enacted or promulgated; provided however, Tenant shall have no obligation to make any structural alterations in connection therewith unless such alterations are required due to Tenant’s Alterations to the Premises (or any application for such Alterations) or Tenant’s particular manner of use of the Premises in which event Tenant shall, upon demand and at Landlord’s option, either (i) make such alterations at Tenant’s sole cost and subject to Article 8 above or (ii) immediately cease the use or remove the Alterations or furniture, fixtures, equipment or apparatus triggering such compliance requirements, all at Tenant’s sole cost. Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated. In addition, Tenant shall fully comply with all present or future programs intended to manage parking, transportation or traffic in and around the Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities. The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said governmental measures, shall be conclusive of that fact as between Landlord and Tenant.

 

ARTICLE 22

 

ENTRY BY LANDLORD

 

Landlord reserves the right at all reasonable times and upon reasonable notice to Tenant to enter the Premises to: (i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees or tenants, or to the ground or underlying lessors; (iii) to post notices of nonresponsibility; or (iv) alter, improve or repair the Premises or the Building if necessary to comply with current building codes or other applicable laws, or for structural alterations, repairs or improvements to the Building, or as Landlord may otherwise reasonably desire or deem necessary. Notwithstanding anything to the contrary contained in this Article 22 , Landlord may enter the Premises at any time, without notice to Tenant, in emergency situations and/or to perform janitorial or other services required of Landlord pursuant to this Lease. Any such entries shall be without the abatement of Rent and shall include the right to take such reasonable steps as required to accomplish the stated purposes. Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenant’s business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenant’s vaults, safes and special security areas designated in advance by Tenant. In an emergency, Landlord shall have the right to enter without notice and use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises.

 

ARTICLE 23

 

ENVIRONMENTAL PROTECTION

 

23.1        Environmental Protection . Tenant’s obligations under this Article 23 shall survive the expiration or termination of this Lease.

 

27



 

23.1.1     As used herein, the term “ Hazardous Materials ” shall mean any toxic or hazardous substance, material or waste or any pollutant or infectious or radioactive material, including but not limited to those substances, materials or wastes regulated now or in the future under any of the following statutes or regulations and any and all of those substances included within the definitions of “hazardous substances,” “hazardous materials,” “hazardous waste,” “hazardous chemical substance or mixture,” “imminently hazardous chemical substance or mixture,” “toxic substances,” “hazardous air pollutant,” “toxic pollutant,” or “solid waste” in the (a) Comprehensive Environmental Response, Compensation and Liability Act of 1990 (“CERCLA” or “Superfund”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C § 9601 et seq., (b) Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. § 6901 et seq., (c) Federal Water Pollution Control Act (“FSPCA”), 33 U.S.C. § 1251 et seq., (d) Clean Air Act (“CAA”), 42 U.S.C. § 7401 et seq., (e) Toxic Substances Control Act (“TSCA”), 14 U.S.C. § 2601 et seq., (f) Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act (“California Superfund”), Cal. Health & Safety Code § 25300 et seq., (h) California Hazardous Waste Control Act, Cal. Health & Safety code § 25100 et seq., (i) Porter-Cologne Water Quality Control Act (“Porter-Cologne Act”), Cal. Water Code § 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal. Health & Safety codes § 25220 et seq., (k) Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”), Cal. Health & Safety code § 25249.5 et seq., (l) Hazardous Substances Underground Storage Tank Law, Cal. Health & Safety code § 25280 et seq., (m) Air Resources Law, Cal. Health & Safety Code § 39000 et seq., and (n) regulations promulgated pursuant to said Laws or any replacement thereof, or as similar terms are defined in the federal, state and local Laws, statutes, regulations, orders or rules. Hazardous Materials shall also mean any and all other biohazardous wastes and substances, materials and wastes which are, or in the future become, regulated under applicable Laws for the protection of health or the environment, or which are classified as hazardous or toxic substances, materials or wastes, pollutants or contaminants, as defined, listed or regulated by any federal, state or local law, regulation or order or by common law decision, including, without limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and other chlorinated solvents, (ii) any petroleum products or fractions thereof, (iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable explosives, (vi) urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials and wastes that are harmful to or may threaten human health, ecology or the environment.

 

23.1.2     Notwithstanding anything to the contrary in this Lease, Tenant, at its sole cost, shall comply with all Laws relating to the storage, use and disposal of Hazardous Materials; provided, however , that Tenant shall not be responsible for complying with any Laws relating to Hazardous Materials existing on, under or around the Premises or the Building as of the date the Premises are delivered to Tenant, and Landlord hereby releases Tenant from any liability with respect thereto. Tenant shall not store, use or dispose of any Hazardous Materials except for standard office supplies in commercially reasonable quantities, and only then in compliance with applicable Laws, and except for those Hazardous Materials listed in a Hazardous Materials management plan (“ HMMP ”) which Tenant shall deliver to Landlord upon execution of this Lease and update at least annually with Landlord (collectively, “ Permitted Materials ”) which may be used, stored and disposed of provided (i) such Permitted Materials are used, stored, transported, and disposed of in strict compliance with applicable Laws, (ii) such Permitted Materials shall be limited to the materials listed on and may be used only in the quantities specified in the HMMP, and (iii) Tenant shall provide Landlord with copies of all material safety data sheets and other documentation required under applicable Laws in connection with Tenant’s use of Permitted Materials as and when such documentation is provided to any regulatory authority having jurisdiction. In no event shall Tenant cause or permit to be discharged into the plumbing or sewage system of the Building or onto the land underlying or adjacent to the Real Property any Hazardous Materials. Tenant shall be solely responsible for and shall defend, indemnify, and hold Landlord and its agents harmless from and against all claims, costs and liabilities, including attorneys’ fees and costs, arising out of or in connection with Tenant’s storage, use and/or disposal of Hazardous Materials. If the presence of Hazardous Materials in or on the Premises, the Building, the Common Areas, or the Real Property caused or knowingly permitted by Tenant results in contamination or deterioration of water or soil, then Tenant shall promptly take any and all action necessary to clean up such contamination, but the foregoing shall in no event be deemed to constitute permission by Landlord to allow the presence of such Hazardous Materials. At any time prior to the expiration of the Lease Term if Tenant has a reasonable basis to suspect that there has been any release or the presence of Hazardous Materials in the ground or ground water on the Premises which did not exist upon commencement of the Lease Term, Tenant shall have the right to conduct appropriate tests of water and soil and to deliver to Landlord the results of such tests to demonstrate that no contamination in excess of permitted levels has occurred as a result of Tenant’s use of the Premises. Tenant shall further be solely responsible for, and shall defend, indemnify, and hold Landlord and its agents harmless from and against all claims,

 

28



 

costs and liabilities, including attorneys’ fees and costs, arising out of or in connection with any breach by Tenant of its obligations under this Section 23.1.2 and any removal, cleanup and restoration work and materials required under this Section 23.1.2 to return the Premises the Building, the Common Areas, or the Real Property and any other property of whatever nature to their condition existing prior to the appearance of the Hazardous Materials.

 

23.1.3    Upon termination or expiration of the Lease Term, Tenant at its sole expense shall cause all Hazardous Materials placed in or about the Premises, the Building and/or the Real Property by Tenant, its agents, contractors, or invitees, and all installations (whether interior or exterior) made by or on behalf of Tenant relating to the storage, use, disposal or transportation of Hazardous Materials to be removed from the property and transported for use, storage or disposal in accordance and compliance with all Laws and other requirements respecting Hazardous Materials used or permitted to be used by Tenant. Tenant shall apply for and shall obtain from all appropriate regulatory authorities (including any applicable fire department or regional water quality control board) all permits, approvals and clearances necessary for the closure of the Real Property and shall take all other actions as may be required to complete the closure of the Building and the Real Property. In addition, if Landlord has a reasonable basis to suspect the existence of Hazardous Materials contamination caused or knowingly permitted by Tenant, then prior to vacating the Premises, Landlord may undertake an environmental site assessment from an environmental consulting company which site assessment shall evidence Tenant’s compliance with this Paragraph 23.1.3. Such testing shall be at Tenant’s expense if Landlord has a reasonable basis for suspecting and confirms the presence of Hazardous Materials in the soil or surface or ground water in, on, under, or about the Real Property, the Building or the Premises, which has been caused by or resulted from the activities of Tenant, its agents, contractors, or invitees.

 

23.1.4    At any time prior to expiration of the Lease Term, subject to reasonable prior notice (not less than forty-eight (48) hours) and Tenant’s reasonable security requirements and provided such activities do not unreasonably interfere with the conduct of Tenant’s business at the Premises, Landlord shall have the right to enter in and upon the Real Property, Building and Premises in order to conduct appropriate tests of water and soil to determine whether levels of any Hazardous Materials in excess of legally permissible levels has occurred as a result of Tenant’s use thereof. Landlord shall furnish copies of all such test results and reports to Tenant and, at Tenant’s option and cost, shall permit split sampling for testing and analysis by Tenant. Such testing shall be at Tenant’s expense if Landlord has a reasonable basis for suspecting and confirms the presence of Hazardous Materials in the soil or surface or ground water in, on, under, or about the Real Property, the Building or the Premises, which has been caused by or resulted from the activities of Tenant, its agents, contractors, or invitees.

 

23.1.5    Landlord may voluntarily cooperate in a reasonable manner with the efforts of all governmental agencies in reducing actual or potential environmental damage. Tenant shall not be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of such voluntary cooperation, nor for any required compliance. Tenant agrees at all times to cooperate fully with the requirements and recommendations of governmental agencies regulating, or otherwise involved in, the protection of the environment.

 

ARTICLE 24

 

[OMITTED] .

 

ARTICLE 25

 

RADIO TRANSCEIVER AND SATELLITE DISH

 

25.1       Grant of License for Wireless Services . Provided that Tenant has not assigned this Lease or sublet any or all of the Premises other than to a Permitted Transferee (it being intended that all rights pursuant to this provision are and shall be personal to the original Tenant under this Lease and shall not be transferable or exercisable for the benefit of any party other than a Permitted Transferee), Tenant shall have the non-exclusive license, in accordance with the terms and conditions of this Article 25, and subject to the provisions of this Lease, to install on the roof of the Building and use during the Term, one (1) line of sight radio transceiver for internet access (“ Radio Transceiver ”) and one (1) satellite dish (“Dish”) supplied and installed by an installation company reasonably acceptable to Landlord (“ Installer ”). The support equipment (“ Support Equipment ”) for the Radio Transceiver and Dish shall be subject to Landlord’s prior approval in its sole discretion. Exclusive of the Support

 

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Equipment, no dimension of the Radio Transceiver or Dish unit shall exceed twenty-four (24) inches. The Radio Transceiver and Dish shall be operated, maintained, repaired, replaced as necessary, and removed by Tenant at Tenant’s sole cost and expense and at no cost or expense to Landlord. The license granted herein shall be for no additional rent or other charge (other than reimbursement of any out-of-pocket expenditures incurred in good faith by Landlord in connection therewith and payment of other costs as provided below).

 

25.2        Location of the Radio Transceiver or Dish. The Radio Transceiver or Dish shall be located on the roof of the Building (and not the elevator penthouse or any parapet) in a location designated by Landlord in its sole discretion (the “ Licensed Area ”). Tenant shall not install any equipment on the roof of the Building other than the Radio Transceiver or Dish, the Support Equipment and any associated wiring and cabling. If Tenant desires to locate the Radio Transceiver or Dish outside the Licensed Area, then Landlord may designate the location or locations of the Radio Transceiver or Dish in its sole discretion, and the designated location for such Radio Transceiver or Dish shall be included in the definition of Licensed Area. The Licensed Area shall be included within the term Premises for all purposes under the Lease, except for the use provisions of Section 5 and payment of Rent.

 

25.3        Approval by Landlord and Permits . The proposed installation, all associated equipment, the means of placing the Radio Transceiver or Dish on the roof of the Building, the connections between the Radio Transceiver or Dish and the Premises, power requirements and cable specifications, shall be subject to Landlord’s prior written approval in its sole discretion, and any approval from all applicable governmental agencies, including ordinances, regulations and any approval from the City of Palo Alto, California. Tenant shall be responsible, at Tenant’s sole cost and expense, to obtain from the City of Palo Alto all permits from any applicable governmental agency necessary to install and operate the Radio Transceiver or Dish. To the extent any installation of the Radio Transceiver or Dish affects the structural integrity of the Building Landlord shall have the absolute right, in its sole discretion, to require any changes or impose any conditions on the installation of the Radio Transceiver or Dish.

 

25.4        Installation and Maintenance of Equipment . The Licensed Area will be delivered to Tenant in its AS IS and WHERE IS condition and Landlord shall have no obligation to modify or install any improvements in the Licensed Area. There shall be no roof penetration in connection with the Radio Transceiver or Dish. If the installation of the Radio Transceiver or Dish adversely affects the structural integrity of the roof, causes any leaks or voids any roof warranty, Tenant shall be responsible for the costs of repairing the roof. Tenant shall coordinate the installation of the Radio Transceiver or Dish with Landlord’s roofing contractor, at Tenant’s sole cost and expense. The mounting of the Radio Transceiver or Dish shall be properly counterweighted. Prior to installing the Radio Transceiver or Dish in the Licensed Area or any equipment associated therewith, Tenant shall provide the insurance certificates reasonably required by Landlord in connection with the work contemplated hereunder. Tenant shall cause Installer to (i) label each cable placed in or on the Building, as well as the Radio Transceiver or Dish, with information as to where the cables originate and where the cables terminate, (ii) prominently label any related equipment with appropriate safety warnings when human exposure to radio frequency radiation may exceed the safety standards of any applicable governmental authority, and (iii) at Tenant’s sole cost, maintain the Radio Transceiver or Dish, all cabling and the Licensed Area in a good, orderly, sanitary and safe condition and repair. Tenant and Installer shall have access to the Licensed Area and other portions of the roof of the Building at all reasonable times and as necessary for the installation, operation, use, maintenance, repair, replacement and removal of the Radio Transceiver or Dish and other improvements associated therewith.

 

25.5        Use: Compliance with Laws . The Licensed Area may be used by Tenant only for the installation, operation, use, maintenance, repair, replacement and removal of the Radio Transceiver or Dish, all at Tenant’s sole risk and expense and in full compliance with all applicable Laws.

 

25.6        Interference . The Radio Transceiver or Dish shall not interfere in any manner with Landlord’s or any tenant’s, occupant’s or licensee’s use or activities in the Building and shall not damage or interfere with any facilities or equipment of any type installed by Landlord or any other person or entity, including without limitation, the Building systems and any satellite dishes, antenna, computer or other devices or systems installed at the Building at any time. Tenant agrees, warrants and represents that if such interference should occur, then Tenant shall take whatever steps are required to correct such interference within two (2) business days after receiving written notice thereof from Landlord. If despite Tenant’s steps to stop such interference, the interference continues, then Tenant shall discontinue using the Radio Transceiver or Dish and related equipment. Tenant’s failure to promptly correct

 

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any such interference or to discontinue using the Radio Transceiver or Dish after written notice of such interference, as set forth herein, shall constitute a default by Tenant under this Lease without requirement for further notice. Tenant agrees that Landlord shall not be responsible for preventing or correcting any interference that may be caused to the Radio Transceiver or Dish and related equipment or its use and that Tenant shall be fully responsible for coordinating and cooperating with other tenants, occupants or licensees who have communications devices at the Building in order to minimize or prevent any interference by or with the Radio Transceiver or Dish and its use.

 

25.7        Title to Equipment and Removal . Tenant or Installer shall at all times remain the owner of the Radio Transceiver or Dish and the related equipment, which shall not be deemed fixtures, notwithstanding their method of installation or attachment to the Building. Tenant shall pay all Tenant’s Taxes with respect to the Radio Transceiver or Dish and related equipment constructed or installed by Tenant or Installer. On or before the Expiration Date or earlier termination date of the Lease, Tenant, at Landlord’s request, shall cause Installer to (i) remove the Radio Transceiver or Dish and related equipment installed or constructed by Installer, (ii) restore the Licensed Area and Building to the condition they were in upon installation of the Radio Transceiver or Dish and related equipment, reasonable wear and tear excepted, and (iii) return the Licensed Area with all debris associated with the Radio Transceiver or Dish being removed. If any of the improvements installed or constructed by Tenant at the Building penetrated the roof membrane or otherwise in any affected the watertight integrity of the Building’s roof, then upon removal of such improvements, Tenant shall provide Landlord with a written warranty, in a form and from a contractor reasonably acceptable to Landlord, warranting the watertight integrity of the roof for a period of ten (10) years after removal of such improvements. If Tenant does not remove the Radio Transceiver or Dish and all of the related equipment, as required hereunder, Landlord may, at its sole option, either retain such items as its own, without any further actions, notice or compensation to Tenant, or remove and dispose of such items in any manner it chooses, restore the Property as required hereunder and charge Tenant for all costs incurred in that effort.

 

25.8        Utilities . Tenant shall pay for all costs of electrical service provided to the Radio Transceiver or Dish.

 

25.9        Relocation . Upon sixty (60) days prior written notice from Landlord Tenant shall relocate the Radio Transceiver or Dish to a different location on the roof of the Building, which area shall become the new Licensed Area.

 

25.10      Indemnification and Waiver . In addition to the indemnification of Landlord set forth in the Lease, Tenant shall indemnity, protect, defend and hold harmless Landlord from any claims, losses, demands, liabilities, and expenses, including attorneys’ fees arising out of or resulting from, in whole or in part, any loss, injury or damage occurring or caused to any person or property during the Term (i) in or about the Licensed Area, or the roof of the Building, arising from the acts or omissions of Tenant, its agents, employees, contractors, or others acting under its control or at its discretion, or by the existence of cabling and any other improvements on the roof of the Building, or (ii) within the vicinity of the Building caused by the Radio Transceiver or Dish becoming detached from the roof; provided, however, that the foregoing indemnification by Tenant shall not apply to the extent any such claims, losses, demands, liabilities, and expenses, including attorneys’ fees are proven by final judgment to have been caused by acts or omissions of Landlord that constitute gross active negligence or willful misconduct. This indemnification shall apply and be enforced to the fullest extent permitted by Law and shall survive termination or expiration of the Term. Landlord shall not be liable to Tenant, and Tenant hereby waives all claims it may have against Landlord, for any loss, injury or damage to any person or property in or about the Licensed Area or the roof of the Building, or resulting from the Radio Transceiver or Dish becoming detached from the roof, any interruption of services and loss of use of the Radio Transceiver or Dish, from any cause, without limitation as to type or description and specifically including acts or omissions constituting the active or sole negligence of Landlord, but excluding from all of the foregoing the acts or omissions of Landlord that are proven by final judgment to constitute gross active negligence or willful misconduct. Notwithstanding any other provision of the Lease, in no event shall Landlord be liable to Tenant for any punitive or consequential damages or damages for loss of business by Tenant. It is the intent of the foregoing provisions that Tenant shall look to its own insurance for payment or reimbursement for any such loss, damage, injury or liability.

 

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ARTICLE 26

 

MISCELLANEOUS PROVISIONS

 

26.1        Terms; Captions . The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed. The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.

 

26.2        Binding Effect . Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease.

 

26.3        No Waiver . No waiver of any provision of this Lease shall be implied by any failure of a party to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently, any waiver by a party of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than the one specified in such waiver and that one only for the time and in the manner specifically stated. No consent, approval, permission or agreement required of Landlord hereunder shall be of any force or effect except to the extent the same is provided in a writing signed by Landlord. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant’s right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.

 

26.4        Modification of Lease; Financials . Should any current or prospective mortgagee or ground lessor for the Building require a modification or modifications of this Lease, which modification or modifications will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified and agrees to execute whatever documents are required therefor and deliver the same to Landlord within ten (10) days following the request therefor. Should Landlord or any such current or prospective mortgagee or ground lessor require execution of a short form of Lease for recording, containing, among other customary provisions, the names of the parties, a description of the Premises and the Lease Term, Tenant agrees to execute such short form of Lease and to deliver the same to Landlord within ten (10) days following the request therefor. In addition, upon request from time to time, Tenant agrees to provide to Landlord, within ten (10) days of written request, current financial statements for Tenant, dated no earlier than one (1) year prior to such request, certified as accurate by Tenant or, if available, audited financial statements prepared by an independent certified public accountant with copies of the auditor’s statement. All such financial statements will be delivered to Landlord and any such lender or purchaser in confidence and shall only be used for purposes of evaluating the financial strength of Tenant or of Guarantor, as applicable.

 

26.5        Transfer of Landlord’s Interest . Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Building, the Real Property and/or in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability under this Lease and Tenant agrees to look solely to such transferee for the performance of Landlord’s obligations hereunder after the date of transfer. Without limiting the generality of the foregoing, it is acknowledged and agreed that the liability of Landlord under this Lease is limited to its actual period of ownership of title to the Building. The liability of any transferee of Landlord shall be limited to the interest of such transferee in the Building or the Real Property and such transferee shall be without personal liability under this Lease, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. Tenant further acknowledges that Landlord may assign its interest in this Lease to a mortgage lender as additional security and agrees that such an assignment shall not release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the performance of its obligations hereunder.

 

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26.6        Prohibition Against Recording . Except as provided in Section 26.4 of this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall make this Lease null and void at Landlord’s election.

 

26.7        Landlord’s Title; Air Rights . Landlord’s title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease.

 

26.8        Tenant’s Signs . Tenant shall be entitled to Building standard signage provided that such signage shall be installed by Landlord at Tenant’s sole cost and the location, quality, design, style, lighting and size of such signs shall be consistent with the applicable laws and ordinances, Landlord’s Building standard signage program and shall be subject to Landlord’s prior written approval, in its reasonable discretion. Upon the expiration or earlier termination of this Lease, Landlord shall, at Tenant’s sole cost and expense, remove such signage and repair all damage to the Building caused by such removal. Subject to the foregoing provisions of this Section 26.8 , Tenant may not install any signs on or in the Building or the Common Areas or any signs, window coverings, or blinds (even if the same are located behind the Landlord approved window coverings for the Building), or other items visible from the exterior of the Premises or Building are subject to the prior approval of Landlord, in its sole and absolute discretion.

 

26.9        Relationship of Parties . Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant.

 

26.10      Application of Payments . Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant’s designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.

 

26.11      Time of Essence . Time is of the essence of this Lease and each of its provisions.

 

26.12      Partial Invalidity . If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.

 

26.13      No Warranty . In executing and delivering this Lease, Tenant has not relied on any representation, including, but not limited to, any representation whatsoever as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the Exhibits attached hereto.

 

26.14 Landlord Exculpation . It is expressly understood and agreed that notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Landlord and the Landlord Parties hereunder (including any successor landlord) and any recourse by Tenant against Landlord or the Landlord Parties shall be limited solely and exclusively to an amount which is equal to the ownership interest of Landlord in the Building and Real Property (excluding any rents, profits or proceeds derived therefrom prior to any final judgment), and neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant.

 

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26.15      Entire Agreement . It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. This Lease and any side letter or separate agreement executed by Landlord and Tenant in connection with this Lease and dated of even date herewith contain all of the terms, covenants, conditions, warranties and agreements of the parties relating in any manner to the rental, use and occupancy of the Premises, shall be considered to be the only agreement between the parties hereto and their representatives and agents, and none of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto. All negotiations and oral agreements acceptable to both parties have been merged into and are included herein. There are no other representations or warranties between the parties, and all reliance with respect to representations is based totally upon the representations and agreements contained in this Lease.

 

26.16      Right to Lease . Landlord reserves the absolute right to effect such other tenancies in the Building as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building (or that any specific tenant or type or number of tenants will not occupy the Building during the Lease Term).

 

26.17      Force Majeure . Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease (collectively, the “ Force Majeure ”), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party’s performance caused by a Force Majeure.

 

26.18      Waiver of Redemption by Tenant . Tenant hereby waives for Tenant and for all those claiming under Tenant all right now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant’s right of occupancy of the Premises after any termination of this Lease.

 

26.19      Notices . All notices, demands, statements or communications (collectively, “ Notices ”) given or required to be given by either party to the other hereunder shall be in writing, shall be sent by United States certified or registered mail, postage prepaid, return receipt requested, or delivered personally (i) to Tenant at the appropriate address set forth in Section 5 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord; or (ii) to Landlord at the addresses set forth in Section 3 of the Summary, or to such other firm or to such other place as Landlord may from time to time designate in a Notice to Tenant. Any Notice will be deemed given on the date it is mailed as provided in this Section 26.19 or upon the date personal delivery is made. If Tenant is notified of the identity and address of Landlord’s mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant’s exercising any remedy available to Tenant.

 

26.20      Joint and Several . If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several.

 

26.21      Authority . If Tenant is a corporation or partnership, Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state of California and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so. Tenant confirms that it is not in violation of any executive order or similar governmental regulation or law, which prohibits terrorism or transactions with suspected or confirmed terrorists or terrorist entities or with persons or organizations that are associated with, or that provide any form of support to, terrorists. Tenant further confirms that it will comply throughout the Term of this Lease, with all governmental laws, rules or regulations governing transactions or business dealings with any suspected or confirmed terrorists or terrorist entities, as identified from

 

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time to time by the U.S. Treasury Department’s Office of Foreign Assets Control or any other applicable governmental entity.

 

26.22      Jury Trial; Attorneys’ Fees . IF EITHER PARTY COMMENCES LITIGATION AGAINST THE OTHER FOR THE SPECIFIC PERFORMANCE OF THIS LEASE, FOR DAMAGES FOR THE BREACH HEREOF OR OTHERWISE FOR ENFORCEMENT OF ANY REMEDY HEREUNDER, THE PARTIES HERETO AGREE TO AND HEREBY DO WAIVE ANY RIGHT TO A TRIAL BY JURY. In the event of any such commencement of litigation, the prevailing party shall be entitled to recover from the other party such costs and reasonable attorneys’ fees as may have been incurred, including any and all costs incurred in enforcing, perfecting and executing such judgment.

 

26.23      Governing Law . This Lease shall be construed and enforced in accordance with the laws of the state of California.

 

26.24      Submission of Lease . Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or an option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.

 

26.25      Brokers . Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 12 of the Summary (the “ Brokers ”), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including without limitation reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party’s dealings with any real estate broker or agent other than the Brokers.

 

26.26      Independent Covenants . This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord’s expense or to any setoff of the Rent or other amounts owing hereunder against Landlord; provided, however, that the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any holder of a mortgage or deed of trust covering the Building, the Real Property or any portion thereof, of whose address Tenant has theretofore been notified, and an opportunity is granted to Landlord and such holder to correct such violations as provided above.

 

26.27      Building Name and Signage . Landlord shall have the right at any time to change the name(s) of the Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Building as Landlord may, in Landlord’s sole discretion, desire. Tenant shall not use the name of the Building or use pictures or illustrations of the Building in advertising or other publicity, without the prior written consent of Landlord.

 

26.28      Confidentiality . Tenant acknowledges that the content of this Lease and any related documents are confidential information. Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenant’s financial, legal, and space planning consultants, or as may be required by applicable Law or a court of competent jurisdiction.

 

26.29      Reasonableness . Tenant’s sole and exclusive remedy for any claim against Landlord that Landlord has unreasonably withheld or unreasonably delayed any consent or approval shall be an action for injunctive or declaratory relief.

 

26.30      Security . Tenant acknowledges that Landlord has not undertaken any duty whatsoever to provide security for the Premises, the Building, the Common Areas or the Real Property and, accordingly, Landlord is not responsible for the security of same or the protection of Tenant’s property or Tenant’s employees, invitees, or contractors from any cause whatsoever, including but not limited to criminal and/or terrorist acts. To the extent

 

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Tenant determines that such security or protection services are advisable or necessary, Tenant shall arrange for and pay the costs of providing same. In the event Landlord in its sole and absolute discretion agrees to provide any security services, whether it be guard service or access systems or otherwise, Landlord shall do so strictly as an accommodation to Tenant and Landlord shall have no liability whatsoever in connection therewith, whether it be for failure to maintain the secure access system, or for failure of the guard service to provide adequate security, or otherwise.

 

26.31      Energy And Resource Consumption . Landlord may voluntarily cooperate in a reasonable manner with the efforts of governmental agencies and/or utility suppliers in reducing energy or other resource consumption within the Property. Tenant shall not be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of such cooperation. Tenant agrees at all times to cooperate fully with Landlord and to abide by all reasonable rules established by Landlord (i) in order to maximize the efficient operation of the electrical, heating, ventilating and air conditioning systems and all other energy or other resource consumption systems with the Property and/or (ii) in order to comply with the recommendations of utility suppliers and governmental agencies regulating the consumption of energy and/or other resources.

 

26.32      Counterparts . This Lease may be executed by facsimile or scanned .pdf (or similar electronic file format) and in counterparts, each of which shall be deemed an original, but such counterparts, when taken together, shall constitute one agreement.

 

[Signatures on Following Page]

 

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IN WITNESS WHEREOF , Landlord and Tenant have caused this Lease to be executed the day and date first above written.

 

 

“Landlord”:

 

 

 

278 UNIVERSITY INVESTORS, LLC,

 

a California limited liability company

 

 

 

By:

/s/ [ILLEGIBLE]

 

 

Name:

[ILLEGIBLE]

 

 

Its:

Member

 

 

 

 

 

 

 

“Tenant”:

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

By:

/s/ Richard Tompane

 

 

Name:

Richard Tompane

 

 

Its:

President & CEO

 

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Exhibit A-1

 

 



 

 


 

EXHIBIT B

 

WORK LETTER

 

THIS WORK LETTER (“ Work Letter ”) is entered into as of this 31 st  day of OCTOBER, 2012, by and between 278 UNIVERSITY INVESTORS, LLC, a California limited liability company (“ Landlord ”), and INVITAE CORPORATION, a Delaware corporation (“ Tenant ”). This Work Letter shall set forth the terms and conditions relating to the initial construction of the Premises.

 

1.             Landlord Work .

 

1.1          Landlord Work . Subject to any “Tenant Delay” or “Force Majeure Delay” (as such terms are defined below), Landlord shall, at Landlord’s sole cost and expense, use its commercially reasonable and diligent efforts to cause South Bay Construction, Inc. (“ Contractor ”) to complete the construction and installation of the Landlord Work in accordance with the terms of this Work Letter and the Lease. As used in this Work Letter and in the Lease, the terms “ Landlord Work ” shall mean those improvements expressly set forth on the “ Final Warm Shell Plans ” (as defined below), as modified by any Change Orders (as defined below) approved pursuant to the express provisions of this Exhibit B .

 

1.2          Substantial Completion . The Landlord Work shall be deemed to be “ Substantially Completed ” on the date Landlord certifies (a set forth in a written certification signed by Landlord) the Landlord Work has been substantially completed in accordance with the Final Warm Shell Plans, as modified by any Change Orders approved pursuant to the express provisions of this Exhibit B . subject to items described in the Punch List; provided the certification as to completion is also reasonably approved by Tenant’s architect, and the completion of any Punch List items do not materially affect Tenant’s occupancy. The definition of Substantially Completed shall also define the terms “ Substantial Completion ” and “ Substantially Complete .”

 

1.3          Final Warm Shell Plans . As used herein the “ Final Warm Shell Plans ” shall mean and refer to the Final Warm Shell Plans attached hereto as Exhibit B-1. Notwithstanding anything to the contrary contained in the Lease or herein, Landlord’s participation in the preparation of the Final Warm Shell Plans, the cost estimates for the Landlord Work and the construction thereof shall not constitute any representation or warranty, express or implied, that the Landlord Work, if built in accordance with the Final Warm Shell Plans, will be suitable for Tenant’s intended purpose. Tenant acknowledges and agrees that the improvements comprising the Landlord Work are intended for use by Tenant and the specifications and design requirements for such improvements are not within the special knowledge or experience of Landlord. Landlord’s sole obligation shall be to arrange the construction of the Landlord Work in accordance with the requirements of the Final Warm Shell Plans. Notwithstanding the foregoing, Landlord agrees to assign to Tenant on a non-exclusive basis the benefit of all construction warranties pertaining to the Landlord Work to the extent that they relate to portions of the Landlord Work that Tenant is required to maintain and repair under the Lease. Landlord does not warrant that the Building or any component thereof will be free of latent defects or that it will not require maintenance and/or repair within any particular period of time, except as expressly provided in Section 1.2 of the Lease. Tenant acknowledges and agrees that it shall rely solely on the warranty or guaranty, if any, from Landlord’s Contractor or other material and/or service providers relative to the proper design and construction of the Landlord Work or any component thereof. Landlord shall have the right to make modifications to the Final Warm Shell Plans without Tenant’s prior written consent provided that such modifications do not materially and adversely affect Tenant (as reasonably determined by Landlord).

 

1.4          Change Orders . Any changes to the Final Warm Shell Plans requested by Tenant shall require the prior written approval of Landlord (not to be unreasonably withheld or delayed). If Tenant desires any change in the Final Warm Shell Plans or Landlord Work which is reasonable and practical (which shall be conclusively determined by Landlord), such changes may only be requested by the delivery to Landlord by Tenant of a proposed written “ Change Order ” specifically setting forth the requested change. Landlord shall endeavor, within ten (10) business days from the receipt of the proposed Change Order, to provide Tenant with Landlord’s disapproval of the proposed change stating the reason(s) for such disapproval, or if the Landlord approves the proposed change, the following items: (i) a summary of any increase in the cost of Landlord Work caused by such

 



 

change (the “ Change Order Cost ”), (ii) a statement of the number of days of any delay caused by such proposed change (the “ Change Order Delay ”), and (iii) a statement of the cost of the Change Order Delay (the “ Change Order Delay Expense ”), which Change Order Delay Expense shall be the product of the number of days of delay multiplied by the estimated daily Base Rent rate. Tenant shall then have three (3) business days to approve the Change Order Cost, the Change Order Delay and the Change Order Delay Expense. If Tenant approves these items, the sum of the Change Order Cost and Change Order Delay Expense shall be concurrently paid to Landlord at the time of such Tenant approval, and Landlord shall thereafter promptly execute the Change Order and cause the appropriate changes to the Final Warm Shell Plans to be made. If Tenant fails to respond to Landlord or pay the amounts described in the foregoing sentence within said three (3) business day period, the Change Order Cost, the Change Order Delay and the Change Order Delay Expense shall be deemed disapproved by Tenant and Landlord shall have no further obligation to perform any work set forth in the proposed Change Order. The Change Order Cost shall include all costs associated with the Change Order, including, without limitation, architectural fees, engineering fees and construction costs, as conclusively determined by Landlord. The Change Order Delay shall include all delays caused by the Change Order, including, without limitation, all design and construction delays, as conclusively determined by Landlord.

 

1.5          Tenant Delays: Force Majeure Delays . As used herein, “ Tenant Delays ” means any delay in the completion of the Landlord Work resulting from any or all of the following: (1) Tenant’s failure to timely perform any of its obligations pursuant to this Work Letter, including, without limitation, any failure to complete, on or before the due date therefor, any action item which is Tenant’s responsibility pursuant to this Work Letter, including Tenant’s failure to grant approvals and/or make payments within the time frames described herein; (2) Tenant’s requested modifications to the Final Warm Shell Plans or any Tenant-initiated Change Orders; (3) Tenant’s request for materials, finishes, or installations which are not readily available, (4) [Omitted], (5) Change Order Delays, or (6) any other act or failure to act by Tenant, Tenant’s Representative, Tenant’s employees, agents, independent contractors, consultants and/or any other person performing or required to perform services on behalf of Tenant, including interference with Landlord, or its contractors, during any early occupancy permitted by Landlord. If there is any delay in the Lease Commencement Date and such delay results from a Tenant Delay, then the Rent Commencement Date and the payment of rent under the Lease shall be accelerated by the number of days of delay caused by the Tenant Delay(s). “ Force Majeure Delays ” as used herein shall have the same meaning as set forth in Section 26.17 of the Lease.

 

1.6          Walk-Through and Punch List . Upon Substantial Completion of the Landlord Work, Tenant and Landlord shall jointly conduct a walk-through of the Landlord Work and shall jointly prepare a punch list (“ Punch List ”) of items needing additional work, including, finishing details, minor omissions, decorations and mechanical adjustments of the type normally found on an architectural “punch list”; provided, however, the Punch List shall be limited to items which are required by the Final Warm Shell Plans as modified by any Change Orders approved pursuant to the express provisions of this Exhibit B .

 

2.             Tenant Improvements .

 

2.1          Space Plan: Working Drawings: Approved Working Drawings . Tenant has retained Ken Hayes or the Hayes Group (the “ Tenant Architect ”) to prepare and supply Landlord with its space plan (the “ Space Plan ”) showing layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein along with other renderings or illustrations reasonably required by Landlord. Landlord shall advise Tenant within five (5) business days after Landlord’s receipt of the complete Space Plan for the Premises if the same is unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall promptly cause the Space Plan to be revised to correct any deficiencies or other matters Landlord may reasonably require. Landlord’s approval of the Space Plan shall not be unreasonably withheld; provided, however, Landlord may withhold its consent in its sole and absolute discretion with respect to any Alterations which may affect the structural components of the Building or the Systems and Equipment or which can be seen from outside the Premises. After the Space Plan has been approved by Landlord, Tenant shall cause the Tenant Architect to complete the architectural and engineering drawings for the Premises, and the Tenant Architect shall compile a fully coordinated set of architectural, structural, mechanical, electrical and plumbing working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “ Working Drawings ”) and shall submit the same to Landlord for Landlord’s approval. The Working Drawing shall be in conformance with the Building Standard

 



 

Tenant Improvement Specifications attached hereto as Exhibit B-2 (the “ Building Standard Specifications ”). Landlord shall advise Tenant within ten (10) business days after Landlord’s receipt of the Working Drawings for the Premises if the same is unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall immediately revise the Working Drawings in accordance with such review and any disapproval of Landlord in connection therewith. The Working Drawings shall be approved by Landlord (the “ Approved Working Drawings ”) prior to the commencement of construction of the Premises by Tenant. After approval by Landlord of the Working Drawings, Tenant may submit the same to the appropriate municipal authorities for all applicable building permits. Tenant hereby agrees that neither Landlord nor Landlord’s consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Premises and that obtaining the same shall be Tenant’s responsibility. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which consent may not be unreasonably withheld. Landlord’s review of the documents described in this paragraph, shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, code compliance or other like matters. Tenant shall pay all direct architectural and/or engineering fees incurred by Landlord in connection with its review of the Space Plan, the Working Drawings and the Approved Working Drawings. The improvements and alterations shown in the Approved Working Drawings shall be referred to collectively herein as the “ Tenant Improvements ”.

 

2.2          Construction of Tenant Improvements . Tenant shall retain Contractor or another licensed general contractor reasonably approved in advance by Landlord (“ Tenant Contractor ”) to construct the Tenant Improvements. The Tenant Improvements shall be diligently prosecuted to completion and shall be constructed in strict accordance with the Approved Working Drawings, at Tenant’s sole cost and expense (subject only to Section 3 below), in a good and workmanlike manner and in compliance with all applicable codes and with the Building Standard Specifications. All subcontractors, laborers, materialmen, and suppliers used by Tenant in connection with the Tenant Improvements (such subcontractors, laborers, materialmen, and suppliers, and the Tenant Contractor to be known collectively as “ Tenant’s Agents ”) must be reasonably acceptable to Landlord. Tenant’s indemnity of Landlord as set forth in this Lease shall also apply with respect to (i) any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or the Tenant’s Agents, or anyone directly or indirectly employed by any of them, relating to the Tenant Improvements and (ii) Tenant’s non-payment of any amount arising out of the Tenant Improvements or Tenant’s disapproval of all or any portion of any request for payment. Tenant acknowledges that the Building elevator shall not be used for transportation of construction personnel, equipment or materials.

 

2.3          Insurance . All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenant as set forth in this Lease. Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of the Tenant Improvements, and such other insurance as Landlord may require, it being understood and agreed that the Tenant Improvements shall be insured by Tenant pursuant to this Lease immediately upon completion thereof. Certificates for all insurance carried pursuant to this Section 2.3 shall be delivered to Landlord before the commencement of construction of the Tenant Improvements. All such policies of insurance must contain a provision that the company writing said policy will give Landlord thirty (30) days prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Tenant Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense. All policies carried under this Section 2.3 shall insure Landlord and Tenant, as their interests may appear, as well as the Tenant Contractor and Tenant’s Agents.

 

2.4          Governmental Compliance . The Tenant Improvements shall comply in all respects with all state, federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person.

 

2.5          Inspection by Landlord . Landlord shall have the right to inspect the Tenant Improvements at all times, provided however, that Landlord’s failure to inspect the Tenant Improvements shall in no event constitute a waiver of any of Landlord’s rights hereunder nor shall Landlord’s inspection of the Tenant Improvements constitute Landlord’s approval of the same.

 



 

3.2          Disbursement of the Improvement Allowance . Except as otherwise set forth in this Work Letter, the Improvement Allowance shall be disbursed by Landlord only for the following items and costs (collectively the “ Improvement Allowance Items ”); (i) payment of the fees of the Tenant Contractor for the cost of construction of the Tenant Improvements, (iv) the hard costs of any changes in the base Building when such changes are required by the Approved Working Drawings, such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith, and (v) the hard costs of any changes to the Approved Working Drawings or Tenant Improvements required by all applicable building codes. In no event shall any portion of the Improvement Allowance be used for design costs, moving costs, cabling or for Tenant’s furniture or any other movable items.

 

3.3          Disbursement of Improvement Allowance . The Improvement Allowance, to the extent payable hereunder, shall be paid to Tenant within thirty (30) days following the completion of construction of the Tenant Improvements, provided that (i) Tenant delivers to Landlord (a) paid invoices for all Tenant Improvements and related costs for which the Tenant Improvement Allowance is to be dispersed, (b) signed permits for all Tenant Improvements completed within the Premises, (c) properly executed unconditional mechanics lien releases in compliance with both California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4) from Tenant’s contractor, subcontractors and material suppliers and any other party which has lien rights in connection with the construction of the Tenant Improvements, (ii) Landlord has determined that no substandard work exists which adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the structure or exterior appearance of the Building, or any other tenant’s use of such other tenant’s leased premises in the Building, (iii) the Tenant Architect delivers to Landlord a “Certificate of Substantial Completion”, in a form reasonably acceptable to Landlord, certifying that the construction of the Tenant Improvements in the Premises has been substantially completed, (iv) Tenant delivers final as-built drawings to Landlord; and (v) a certificate of occupancy, a temporary certificate of occupancy or its equivalent is issued to Tenant for the Premises. Landlord shall only be obligated to make disbursements from the Improvement Allowance to the extent costs are incurred by Tenant for Improvement Allowance Items. In lieu of paying the Improvement Allowance in cash, Landlord shall have the right, in Landlord’s sole and absolute discretion, to apply that portion of the Improvement Allowance payable to Tenant under this Section 3 to Rent first payable by Tenant following satisfaction of the conditions set forth in this Section 3.3.

 

4.             Miscellaneous Construction Covenants.

 

4.1          Other Terms . All Improvement Allowance Items for which the Improvement Allowance has been made available shall be deemed Landlord’s property under the terms of this Lease, Landlord may, by written notice to Tenant prior to the end of the Lease Term, or given following any earlier termination of the Lease, require Tenant, at Tenant’s expense, to remove any Tenant Improvements and to repair any damage to the Premises and Building caused by such removal and return the affected portion of the Premises or Building to their condition existing prior to the installation of such Tenant Improvements; provided, however, that notwithstanding the foregoing, upon request by Tenant at the time of Tenant’s request for Landlord’s approval of the Approved Working Drawings, Landlord shall notify Tenant whether the Tenant Improvements will be required to be removed pursuant to the terms of this Section 4.1 . Notwithstanding any provision to the contrary contained in the Lease or this Work Letter, if any default by Tenant under the Lease or this Work Letter occurs at any time on or before the substantial completion of the Tenant Improvements, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may, without any liability whatsoever, cause the cessation of construction of the Tenant Improvements (in which case, Tenant shall be responsible for any delay in the substantial completion of the Tenant Improvements and any costs occasioned thereby), and (ii) all other obligations of Landlord under the terms of the Lease and this Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease.

 

4.2          Early Occupancy . If any portion of the Premises may be occupied by Tenant without materially interfering (in Landlord’s reasonable opinion) with the safe and efficient completion of the Landlord Work by Landlord, upon no less than three days prior written notice to Landlord, Tenant may elect to enter upon the Premises for the sole purpose of constructing its Tenant Improvements, trade fixtures and equipment and installing telephone and computer lines and equipment. Any early occupancy of the Premises permitted by Landlord prior to the Lease

 



 

Commencement Date shall not trigger any obligation of Tenant for the payment of the Base Rent, but shall be subject to all other terms and conditions of the Lease, specifically including, without limitation, the terms of this Work Letter. If, in Landlord’s reasonable judgment, Tenant interferes with the Landlord Work or detrimentally affects Landlord’s ability to comply with its commitments for completing its improvements on the Premises or causes labor difficulties, Landlord will have the right, without limiting any other remedies of Landlord, to order Tenant’s early entry to cease on 24 hours’ notice to Tenant, and if Landlord so requires in connection therewith because such items are interfering with the Landlord Work, Tenant agrees to remove all tools, equipment and materials from the Premises.

 

4.3          Designation of Representatives . With respect to the planning, design and construction of the Landlord Work and the Tenant Improvements, Landlord hereby designates Joe Martignetti as “ Landlord’s Representative ” and Tenant hereby designates Richard Tompane as “ Tenant’s Representative .” Tenant hereby confirms that Tenant’s Representative has full authority to act on behalf of and to bind Tenant with respect to all matters pertaining to the planning, design and construction of the Landlord Work and the Tenant Improvements. Landlord hereby confirms that Landlord’s Representative has authority to act on behalf of Landlord with respect to matters pertaining to the planning, design and construction of the Improvements. Either party may change its designated representative upon five (5) days prior written notice to the other party.

 

IN WITNESS WHEREOF, this Work Letter is executed as of the date first written above.

 

LANDLORD:

TENANT:

 

 

278 UNIVERSITY INVESTORS, LLC,

INVITAE CORPORATION,

a California limited liability company

a Delaware corporation

 

 

 

 

By:

[ILLEGIBLE]

 

By:

/s/ RICHARD TOMPANE

 

 

 

 

 

Name:

[ILLEGIBLE]

 

Name:

RICHARD TOMPANE

 

 

 

 

 

Title:

MEMBER

 

Title:

PRESIDENT & CEO

 

 

 

 

 

Dated:

OCTOBER 31 , 2012

 

Dated:

31 OCTOBER , 2012

 



 

EXHIBIT C

 

COMMENCEMENT DATE MEMORANDUM

 

THIS COMMENCEMENT DATE MEMORANDUM (this “ Memorandum ”) is made and entered into effective as of December 1, 2012, by and between 278 UNIVERSITY INVESTORS, LLC, a California limited liability company (“ Landlord ”) and INVITAE CORPORATION, a Delaware corporation (“ Tenant ”).

 

R E C I T A L S :

 

A.             Landlord and Tenant entered into that certain Lease dated as of October 31, 2012 (the “ Lease ”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, as described in the Lease, in that certain Building located at 278 University Avenue, Palo Alto, California.

 

B.             Except as otherwise set forth herein, all capitalized terms used in this Memorandum shall have the same meaning as such terms have in the Lease.

 

C.             Landlord and Tenant desire to confirm the Lease Commencement Date and the Expiration Date of the Lease Term, as hereinafter provided.

 

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.              Confirmation of Dates .   The parties hereby confirm:

 

(a)           The Lease Commencement Date is December 1, 2012.

 

(b)           The Rent Commencement Date is March 15, 2013

 

(c)           The Lease Expiration Date is March 31, 2020.

 

2.              No Further Modification .   Except as set forth in this Memorandum, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

 

IN WITNESS WHEREOF, this Memorandum has been executed as of the day and year first above written.

 



 

 

“Landlord”:

 

 

 

278 UNIVERSITY INVESTORS, LLC,

 

a California Limited liability company

 

 

 

By:

/s/ [ILLEGIBLE]

 

 

Name:

[ILLEGIBLE]

 

 

Its:

MEMBER

 

 

 

 

 

“Tenant”:

 

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

By:

/s/ [ILLEGIBLE]

 

 

Name:

[ILLEGIBLE]

 

 

Its:

PRESIDENT & CEO

 




Exhibit 10.15

 

 

SUBLEASE AGREEMENT BETWEEN

 

INMOBI, INC.

 

AND

 

INVITAE CORPORATION

 

475 BRANNAN STREET
SAN FRANCISCO, CALIFORNIA

 

Portion of 3 rd  Floor

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

1.

Subleased Premises

1

 

 

 

2.

Term

1

 

 

 

3.

Rent

2

 

 

 

 

3.1

Rent Payments

2

 

3.2

Operating Costs

3

 

 

 

 

4.

Security Deposit

5

 

 

 

5.

Use and Occupancy

6

 

 

 

 

5.1

Use

6

 

5.2

Compliance with Master Lease

6

 

5.3

Landlord’s Obligations

6

 

 

 

 

6.

Master Lease and Sublease Terms

7

 

 

 

 

6.1

Subject to Master Lease

7

 

6.2

Representations

7

 

6.3

Incorporation of Terms of Master Lease

7

 

6.4

Modifications

8

 

6.5

Exclusions

8

 

6.6

Preservation of Master Lease

9

 

 

 

 

7.

Transfers

9

 

 

 

8.

Default

9

 

 

 

9.

Remedies

9

 

 

 

10.

Right to Cure Defaults

9

 

 

 

 

10.1

Subtenant Default

9

 

10.2

Sublandlord Default

10

 

 

 

 

11.

Consents and Approvals

10

 

 

 

12.

Sublandlord’s Liability

10

 

 

 

13.

Indemnities

11

 

 

 

 

13.1

Indemnification of Sublandlord

11

 

13.2

Indemnification of Subtenant

11

 

i



 

 

13.3

Control of Defense and Attorneys’ Fees

11

 

 

 

 

14.

Delivery of Possession

12

 

 

 

 

14.1

Timing

12

 

14.2

Condition

12

 

 

 

 

15.

Surrender and Holding Over

12

 

 

 

16.

Parking

13

 

 

 

17.

Notices

13

 

 

 

18.

Signage

14

 

 

 

19.

Brokers

14

 

 

 

20.

Conditions Precedent

15

 

 

 

21.

Complete Agreement

15

 

 

 

22.

Interpretation

15

 

 

 

23.

Counterparts

16

 

 

 

24.

Quiet Enjoyment

16

 

 

 

25.

Authority to Execute

16

 

 

 

26.

Recitals and Exhibits

16

 

 

 

27.

Right of First Offer to Expand

16

 

 

 

28.

Furniture

16

 

 

 

29.

Cabling

17

 

ii



 

SUBLEASE

 

THIS SUBLEASE (“Sublease”) is entered into and effective as of November 21, 2014, by and between INMOBI INC., a Delaware corporation (“Sublandlord”) and INVITAE CORPORATION, a Delaware corporation (“Subtenant”) with reference to the following facts:

 

A.                                Pursuant to that certain Lease dated as of March 26, 2012 (the “Master Lease”), CLPF-475 Brannan Street, L.P., a Delaware limited partnership (“Landlord”), successor in interest to PRU/SKS Brannan Associates, LLC, as Landlord, leases to Sublandlord, as Tenant, certain space (the “Master Lease Premises”) consisting of 39,372 rentable square feet on the third (3rd) and fourth (4th) floors of the Building located at 475 Brannan Street in the city of San Francisco, California (the “Building”). A copy of the Master Lease is attached hereto as Exhibit A. Unless otherwise defined herein, capitalized terms used herein shall have the same meaning as in the Lease.

 

B.                                     Subtenant wishes to sublease from Sublandlord, and Sublandlord wishes to sublease to Subtenant, a portion of the Master Lease Premises, known as the Suite 310 Premises, more particularly identified and described in Section 1 below and on the floor plan attached hereto as Exhibit B.

 

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the parties, Sublandlord and Subtenant hereby agree as follows:

 

1.                                       Subleased Premises . Sublandlord hereby subleases to Subtenant and Subtenant hereby subleases from Sublandlord for the Term, at the rental, and upon all of the conditions set forth herein, the Subleased Premises. The term “Subleased Premises” means the premises containing approximately 12,286 rentable square feet of space located on the 3 rd  floor of the Building.

 

2.                                       Term .

 

(a)                                  Initial Term . The term of this Sublease (“Term”) shall commence on the date (the “Commencement Date”) that is the later to occur of (i) receipt of a commercially reasonable form of Landlord’s Consent hereto (the “Landlord Consent”), and (ii) December 1, 2014, and shall end on April 30, 2017 (the “Expiration Date”), unless sooner terminated pursuant to any provision hereof. Upon the determination of the Commencement Date, Sublandlord and Subtenant will enter into a letter agreement in the form of Exhibit C attached hereto.

 

(b)                                  Delay in Commencement Date . Notwithstanding any of the foregoing, if the Commencement Date does not occur on or before December 31, 2014, for any reason other than due to delays caused by Subtenant (including, without limitation, delays in the Commencement Date arising from Subtenant’s failure to timely execute and deliver the Landlord Consent), Subtenant shall have the right to terminate this Sublease upon delivering written notice to Sublandlord at any time prior to the Commencement Date, and, in such event, Sublandlord shall refund any monies previously tendered by Subtenant within thirty (30) days of receipt of such notice, this Sublease shall immediately terminate, and neither party shall have any further rights or obligations under this Sublease. For the sake of clarity, Subtenant’s sole and exclusive

 

1



 

remedy for any delay in the Commencement Date (irrespective of the cause of delay) shall be termination of this Sublease and refund of all monies previously tendered by Subtenant.

 

(c)           Early Access . If Sublandlord receives the Landlord Consent prior to December 1, 2014, Sublandlord shall permit Subtenant to access the Subleased Premises to commence installation of Subtenant’s furniture, fixtures, and equipment, and such occupancy (i) shall be subject to all of the provisions of this Sublease, except for the obligation to pay Base Rent or Additional Rent (as defined below); and (ii) shall not advance the Expiration Date of this Sublease.

 

3.                                       Rent .

 

3.1                                Rent Payments .

 

(a)                                  From and after the Commencement Date, Subtenant shall pay to Sublandlord as base rent for the Subleased Premises during the Term (“Base Rent”) the following:

 

Months of Term

 

Annual Base Rent Per RSF

 

Monthly Base Rent

1–12*

 

$

64.00

 

$

65,525.33

13–24

 

$

65.92

 

$

67,491.09

25–29

 

$

67.90

 

$

69,518.28

 


* If the Commencement Date is a date other than the first (1st) day of a calendar month, then the “first” month following the Commencement Date for purposes of the foregoing Base Rent schedule shall be the first full month after the month in which the Commencement Date occurs. For example, if the Commencement Date is February 25, 2015, for the purposes of this schedule, the first “month” following the Commencement Date will be March, 2015, and thus “months 1 - 12” in the above-referenced chart would expire as of February 29, 2016.

 

(b)                                       Notwithstanding anything above to the contrary, during the period from the Commencement Date until the “Sublandlord Work,” as that term is defined in Section 14.2, below, is substantially completed, (i) Sublandlord shall be permitted access to the kitchen in the Subleased Premises during non-business hours for the purposes of using the dishwasher and sink and (ii) as long as Subtenant is not in default of this Sublease, Subtenant shall be entitled to a twenty percent (20%) discount on its Base Rent payments. Sublandlord’s access of the Subleased Premises pursuant to this Section 3.1(b) shall be limited to the kitchen and a reasonable path-of-travel from the staircase to the kitchen, and Sublandlord shall have no right to enter portions of the Subleased Premises other than the kitchen and such path-of-travel. Further, Sublandlord shall use diligent, good faith efforts to refrain from interfering with the business operations of Subtenant in the other areas of the Subleased Premises, and shall use diligent, good faith efforts to protect the confidentiality of Subtenant’s work product, files, documents, computer files, and all other confidential or proprietary information located in the Subleased Premises.

 

(c)                                   Notwithstanding anything above to the contrary and provided that Subtenant is not then in default under this Sublease beyond any notice and cure period,

 

2



 

Subtenant shall be entitled to an abatement of Rent for the thirteenth (13 th ) and twenty-fifth (25 th ) full calendar months of the Term (each, a “Rent Abatement Period”). During each Rent Abatement Period, the monthly Base Rent and Subtenant’s Percentage Share of Operating Costs shall be abated. Subtenant acknowledges and agrees that the abatement provided herein has been granted to Subtenant as additional consideration for entering into this Sublease, and for agreeing to pay the rental and performing the terms and conditions otherwise required under this Sublease. If Subtenant shall be in default and shall fail to cure such default within the notice and cure period, if any, permitted for cure pursuant to this Sublease, then Subtenant’s right to the abatement shall terminate, and if this Sublease is terminated, Sublandlord shall be permitted to pursue, as part of its damages pursuant to Section 9 of this Sublease, the recovery of the unamortized portion of any abated Base Rent, with interest.

 

(d)                             Base Rent shall be paid on the first day of each month commencing as of the Commencement Date, except that Subtenant shall pay the first month’s Base Rent to Sublandlord upon execution of this Sublease and delivery of this Sublease to Sublandlord; said pre-paid Base Rent will be applied towards Base Rent for first month payable following the Commencement Date. If the Term does not begin on the first day of a calendar month, the Base Rent and Additional Rent (hereinafter defined) for any partial month shall be prorated by multiplying the monthly Base Rent and Additional Rent by a fraction, the numerator of which is the number of days of the partial month included in the Term and the denominator of which is the total number of days in the full calendar month. All Rent (hereinafter defined) shall be payable in lawful money of the United States, by regular bank check of Subtenant, to Sublandlord at the following address:

 

InMobi, Inc.

475 Brannan Street, Suite 410

San Francisco, CA 94107

Attn: Mr. Amit Gupta

 

or to such other persons or at such other places as Sublandlord may designate in writing; provided, that Sublandlord shall have the right to have all Rent paid by electronic transfer in accordance with written instructions from Sublandlord to Subtenant.

 

3.2                                Operating Costs .

 

(a)                                  Definitions . For purposes of this Sublease and in addition to the terms defined elsewhere in this Sublease, the following terms shall have the meanings set forth below:

 

(i)                                      Additional Rent ” shall mean the sums payable pursuant to Section 3.2(b) below.

 

(ii)                                   Operating Costs ” shall mean Operating Expenses and Real Property Taxes (as defined in the Master Lease) charged by Landlord to Sublandlord pursuant to the Master Lease.

 

(iii)                                Rent ” shall mean, collectively, Base Rent, Additional Rent, and all other sums payable by Subtenant to Sublandlord under this Sublease, whether or

 

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not expressly designated as “rent”, all of which are deemed and designated as rent pursuant to the terms of this Sublease.

 

(iv)                               Subtenant’s Percentage Share ” shall mean 31.21%.  Subtenant’s Percentage Share has been obtained by dividing the rentable area of the Subleased Premises by the rentable area of the Master Lease Premises and multiplying such quotient by 100. In the event Subtenant’s Percentage Share is changed during a calendar year by reason of a change in the rentable area of the Subleased Premises or the Master Lease Premises, Subtenant’s Percentage Share shall thereupon be adjusted to equal the result obtained by dividing the rentable area of the Subleased Premises by the rentable area of the Master Lease Premises and multiplying such quotient by 100, and Subtenant’s Percentage Share shall be determined on the basis of the number of days during such calendar year at each such percentage share.

 

(b)                                  Payment of Additional Rent . In addition to the Base Rent payable pursuant to Section 3.1 above, for each calendar year of the Term, Subtenant, as Additional Rent, shall pay Subtenant’s Percentage Share of Operating Costs payable by Sublandlord for the then current calendar year. Sublandlord shall give Subtenant written notice of Sublandlord’s estimate of the amount of Additional Rent per month payable pursuant to this Section 3.2(b) for each calendar year promptly following the Sublandlord’s receipt of Landlord’s estimate of the Operating Costs payable under the Master Lease. Thereafter, the Additional Rent payable pursuant to this Section 3.2(b) shall be determined and adjusted in accordance with the provisions of Section 3.2(c) below.

 

(c)                                   Procedure . The determination and adjustment of Additional Rent payable hereunder shall be made in accordance with the following procedures:

 

(i)                                      Delivery of Estimate; Payment . Upon receipt of a statement from Landlord specifying the estimated Operating Costs to be charged to Sublandlord under the Master Lease with respect to each calendar year, or as soon after receipt of such statement as practicable, Sublandlord shall give Subtenant written notice of its estimate of Additional Rent payable under Section 3.2(b) for the ensuing calendar year, which estimate shall be prepared based on the estimate received from Landlord (as Landlord’s estimate may change from time to time), together with a copy of the statement received from Landlord. On or before the first day of each month during each calendar year, Subtenant shall pay to Sublandlord as Additional Rent 31.21% of such estimated amount together with the Base Rent.

 

(ii)                                   Sublandlord’s Failure to Deliver Estimate . In the event Sublandlord’s notice set forth in Subsection 3.2(c)(i) is not given on or before December of the calendar year preceding the calendar year for which Sublandlord’s notice is applicable, as the case may be, then until the calendar month after such notice is delivered by Sublandlord, Subtenant shall continue to pay to Sublandlord monthly, during the ensuing calendar year, estimated payments equal to the amounts payable hereunder during the calendar year just ended. Upon receipt of any such post-December notice Subtenant shall (i) commence as of the immediately following calendar month, and continue for the remainder of the calendar year, to pay to Sublandlord monthly such new estimated payments, (ii) if the monthly installment of the new estimate of such Additional Rent is greater than the monthly installment of the estimate for the previous calendar year, pay to Sublandlord within thirty (30) days of the receipt of such

 

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notice an amount equal to the difference of such monthly installment multiplied by the number of full and partial calendar months of such year preceding the delivery of such notice and (iii) if the monthly installment of the new estimate of such Additional Rent is less than the monthly installment of the estimate for the previous calendar year, an amount equal to the difference of such monthly installment multiplied by the number of full or partial calendar months of such year preceding the delivery of such notice shall be credited against the next payment of Rent coming due by Subtenant under this Sublease.

 

(d)                                  Year End Reconciliation . Within thirty (30) days after the receipt by Sublandlord of a final statement of Operating Costs from Landlord with respect to each calendar year, Sublandlord shall deliver to Subtenant a statement (“Sublandlord’s Statement”) the adjustment to be made pursuant to Section 3.2 for the calendar year just ended, together with a copy of any corresponding statement received by Sublandlord from Landlord. If on the basis of such Sublandlord’s Statement Subtenant owes an amount that is less than the estimated payments actually made by Subtenant for the calendar year just ended, Sublandlord shall credit such excess to the next payment of Rent coming due or, if the term of this Sublease is about to expire, refund such excess to Subtenant within thirty (30) days of determination. If on the basis of such Sublandlord’s Statement Subtenant owes an amount that is more than the estimated payments for the calendar year just ended previously made by Subtenant, Subtenant shall pay the deficiency to Sublandlord within thirty (30) days after delivery of the statement from Sublandlord to Subtenant.

 

(e)                                   Review of Master Landlord’s Books . For so long as Sublandlord has not subleased the remaining Master Lease Premises to a third party, Sublandlord may elect, in its reasonable discretion, to review Master Landlord’s books and records as permitted under Section 4(c) of the Master Lease. However, if Sublandlord subleases the remaining Master Lease Premises to a third party, then, on Subtenant’s request and at Subtenant’s expense, Sublandlord must review Master Landlord’s books and records as permitted under Section 4(c) of the Master Lease. To the extent any refunds are credited to Sublandlord relative to amounts actually paid by Subtenant, Sublandlord shall promptly refund such amounts to Subtenant.

 

(f)                                    Survival . The expiration or earlier termination of this Sublease shall not affect the obligations of Sublandlord and Subtenant pursuant to Subsection 3.2(d), and such obligations shall survive, remain to be performed after, any expiration or earlier termination of this Sublease.

 

4.                                       Security Deposit . Concurrently with Subtenant’s execution of this Sublease, Subtenant shall deposit with Sublandlord the cash sum of $208,554.84 (the “Security Deposit”). The Security Deposit shall be held by Sublandlord as security for the faithful performance by Subtenant of all the provisions of this Sublease to be performed or observed by Subtenant. If Subtenant fails to pay rent or other sums due hereunder, or otherwise defaults with respect to any provisions of this Sublease, and such failure or default is not cured within the applicable notice and cure period, Sublandlord may use, apply or retain all or any portion of the Security Deposit for the payment of any rent or other sum in default, to repair or maintain the Subleased Premises, to perform any other terms, covenants, or conditions contained in this Sublease, or to compensate Sublandlord for any loss or damage which Sublandlord may suffer thereby. If Sublandlord so uses or applies all or any portion of the Security Deposit, Subtenant shall within ten (10) days

 

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after demand therefor deposit cash with Sublandlord in an amount sufficient to restore the Security Deposit to the full amount thereof and Subtenant’s failure to do so shall be a material breach of this Sublease. Sublandlord shall not be required to keep the Security Deposit separate from its general accounts. If Subtenant performs all of Subtenant’s obligations hereunder, the Security Deposit, or so much thereof as has not theretofore been applied by Sublandlord, shall be returned, without interest, to Subtenant (or, at Sublandlord’s option, to the last assignee, if any, of Subtenant’s interest hereunder) within thirty (30) days following the later to occur of (x) the expiration of the Term, and (y) Subtenant’s vacation of the Subleased Premises. No trust relationship is created herein between Sublandlord and Subtenant with respect to the Security Deposit.

 

5.                                       Use and Occupancy .

 

5.1                                Use . The Subleased Premises shall be used and occupied only for general office use, and for no other use or purpose, in full compliance with the Master Lease and this Sublease.

 

5.2                                Compliance with Master Lease . Subtenant agrees that it will occupy the Subleased Premises in accordance with the terms of the Master Lease and each party agrees that it will not do or omit to do or permit any act which may result in a violation of or a default under any of the terms and conditions of the Master Lease, or render Sublandlord or Subtenant liable for any damage, charge or expense thereunder. Except as otherwise expressly provided herein, Sublandlord will perform its covenants and obligations under the Master Lease which do not require for their performance possession of the Subleased Premises and which are not otherwise to be performed hereunder by Subtenant on behalf of Sublandlord. Any other provision in this Sublease to the contrary notwithstanding, Subtenant shall pay to Sublandlord as Rent hereunder any and all sums which Sublandlord may be required to pay Landlord arising out of a request by Subtenant for, or use by Subtenant of, additional or over-standard Building services from Landlord (for example, but not by way of limitation, charges associated with after-hour HVAC usage and overstandard electrical charges) and Sublandlord agrees to cooperate with Subtenant in requesting such additional services. Sublandlord acknowledges and agrees that, to the extent required by the Master Lease, Sublandlord shall be responsible for all modifications or improvements to the Subleased Premises required to comply with governmental requirements that do not result from Subtenant’s specific use, alterations, or improvements in the Subleased Premises.

 

5.3                                Landlord’s Obligations . Sublandlord hereby grants to Subtenant the right to receive all of the services and benefits with respect to the Subleased Premises which are to be provided by Landlord under the Master Lease. Subtenant agrees that Sublandlord shall not be required to perform any of the covenants, agreements and/or obligations of Landlord under the Master Lease and, insofar as any of the covenants, agreements and obligations of Sublandlord hereunder are required to be performed under the Master Lease by Landlord thereunder, Subtenant acknowledges and agrees that Sublandlord shall be entitled to look to Landlord for such performance. In addition, Sublandlord shall have no obligation to perform any repairs or any other obligation of Landlord under the Master Lease with respect to this Sublease. Sublandlord shall not be responsible for any failure or interruption, for any reason whatsoever, of the services or facilities that may be appurtenant to or supplied at the Building by Landlord or

 

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otherwise, including, without limitation, heat, air conditioning, ventilation, life-safety, water, electricity, elevator service and cleaning service, if any; and no failure to furnish, or interruption of, any such services or facilities shall give rise to any (i) abatement, diminution or reduction of Subtenant’s obligations under this Sublease except as otherwise provided herein or in the Master Lease, or (ii) liability on the part of Sublandlord. Notwithstanding the foregoing, Sublandlord shall use commercially reasonable efforts to secure such performance upon Subtenant’s request to Sublandlord to do so, and, if and to the extent Sublandlord’s rent abates under the Master Lease for any reason, including, but not limited to, loss of services from Master Landlord, impaired access to the Premises, or impaired occupancy of the Premises due to casualty or condemnation, then to the extent any rent abatement applies to the Subleased Premises, Subtenant’s Base Rent shall abate for the portion of the Subleased Premises affected by such event.

 

6.                                       Master Lease and Sublease Terms .

 

6.1                                Subject to Master Lease . This Sublease is and shall be at all times subject and subordinate to the Master Lease and the Landlord Consent. Subtenant acknowledges that Subtenant has reviewed and is familiar with all of the terms, agreements, covenants and conditions of the Master Lease and Landlord Consent. Subtenant agrees to maintain the terms of this Sublease and the Master Lease in strict confidence. During the Term and for all periods subsequent thereto with respect to obligations which have arisen prior to the termination of this Sublease, Subtenant agrees to perform and comply with, for the benefit of Sublandlord and Landlord, the obligations of Sublandlord under the Master Lease which pertain to the Subleased Premises and/or this Sublease, except for those provisions of the Master Lease which are expressly and directly contradicted by this Sublease, in which event the terms of this Sublease document shall control over the Master Lease.

 

6.2                                Representations . Sublandlord represents and warrants to Subtenant that (a) Exhibit A is a full and complete copy of the Master Lease, (b) the Master Lease is, as of the date hereof, in full force and effect, and (c) to Sublandlord’s knowledge, no default has occurred under the Master Lease, no notices of default have been sent or received by Sublandlord with respect to the Master Lease, and no event has occurred and is continuing which would constitute an Event of Default but for the requirement of giving notice and/or the expiration of the period of time to cure.

 

THE EXPRESS WARRANTIES SET FORTH IN THIS SUBLEASE ARE THE ONLY WARRANTIES MADE BY A PARTY, AND THERE ARE NO IMPLIED WARRANTIES STATUTORY OR OTHERWISE.

 

6.3                                Incorporation of Terms of Master Lease . The terms, conditions and respective obligations of Sublandlord and Subtenant to each other under this Sublease shall be the terms and conditions of the Master Lease, except for those provisions of the Master Lease which are directly contradicted by this Sublease, in which event the terms of this Sublease shall control over the Master Lease. Therefore, for the purposes of this Sublease, (a) wherever in the Master Lease the word “Landlord” is used it shall be deemed to mean Sublandlord (except where this Sublease requires otherwise), (b) wherever in the Master Lease the word “Tenant” is used it shall be deemed to mean Subtenant (except where this Sublease requires otherwise), (c) each

 

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reference to “Lease” shall be deemed a reference to “Sublease”, (d) each reference to the “Premises” shall be deemed a reference to the “Subleased Premises”, and (e) each reference to “Term”, “Commencement Date”, and “Expiration date” shall be deemed a reference to the Term, Commencement Date, and Expiration Date of this Sublease, respectively. Any right of Landlord under the Master Lease (a) of access or inspection, (b) to do work in the Master Lease Premises or in the Building, (c) in respect of rules and regulations, which is incorporated herein by reference, shall be deemed to inure to the benefit of Sublandlord, Landlord, and any other person intended to be benefited by said provision, for the purpose of incorporation by reference in this Sublease.

 

6.4                                Modifications . For the purposes of incorporation herein, the terms of the Master Lease are subject to the following additional modifications:

 

(a)                                       Approvals . In all provisions of the Master Lease (under the terms thereof and without regard to modifications thereof for purposes of incorporation into this Sublease) requiring the approval or consent of Landlord, Subtenant shall be required to obtain the approval or consent of both Sublandlord and Landlord.

 

(b)                                       Deliveries . In all provisions of the Master Lease requiring Tenant to submit, exhibit to, supply or provide Landlord with evidence, certificates, or any other matter or thing, Subtenant shall be required to submit, exhibit to, supply or provide, as the case may be, the same to both Landlord and Sublandlord.

 

(c)                                        Damage; Condemnation . Neither Sublandlord nor Subtenant shall have an obligation to restore or rebuild any portion of the Subleased Premises after any destruction or taking by eminent domain.

 

(d)                                       Insurance . In all provisions of the Master Lease requiring Tenant to designate Landlord as an additional or named insured on its insurance policy, Subtenant shall be required to so designate Landlord and Sublandlord on its insurance policy.

 

(e)                                        Waiver of Subrogation . Subtenant hereby waives claims against Master Landlord and Sublandlord for property damage to the Subleased Premises or its contents and for all other claims waived as and to the extent that Sublandlord (as “Tenant”) waived such claims against Master Landlord (as “Landlord”) under the Master Lease. Notwithstanding anything to the contrary in the Master Lease or the Sublease, Sublandlord and Subtenant hereby release each other from all liability for damage to any property or loss of any kind which is caused by or results from any risk insured against under any property insurance policy required to be carried by either party under this Sublease, which is required to be insured against under this Sublease, or which would normally be covered by all risk property insurance.

 

6.5                                Exclusions . Notwithstanding the foregoing, Subtenant shall have no rights nor obligations under the following parts, Sections and Exhibits of the Master Lease: Sections 2, 3(a), 3(d), 3(e), 22, 23(g), 23(s), first sentence of 25(a), 25(d), 26, 27, 30 and Exhibits A-1, A-2, C, D, E, F and G.

 

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6.6                                Preservation of Master Lease . Sublandlord agrees that it will not exercise any right to terminate the Master Lease prior to the expiration of the Master Lease Term without obtaining the prior written consent of Subtenant.

 

7.                                       Transfers . Subtenant shall not Transfer this Sublease or all or any part of the Subleased Premises except subject to and in compliance with all of the terms and conditions of Article 12 of the Master Lease. In addition, Sublandlord shall have the same approval rights and notification obligations with respect to assignment and subleasing as Landlord has under Article 12(c) of the Master Lease. Subtenant shall pay all fees and costs payable to Master Landlord pursuant to the Master Lease in connection with any proposed Transfer, together with all of Sublandlord’s reasonable out-of-pocket costs relating to Subtenant’s request for such consent (such costs not to exceed $3,500.00), regardless of whether such consent is granted, and the effectiveness of any such consent shall be conditioned upon Master Landlord’s and Sublandlord’s receipt of all such fees and costs.

 

8.                                       Default . Except as expressly set forth herein, Subtenant shall perform all obligations in respect of the Subleased Premises that Sublandlord would be required to perform pursuant to the Master Lease. It shall constitute an event of default hereunder if Subtenant fails to perform any obligation hereunder, or any obligation under the Master Lease which has been incorporated herein by reference, and Subtenant has not remedied such failure after delivery of any written notice required under this Sublease and passage of any applicable grace or cure period provided in the Master Lease less one (1) business day for the Event of Default described in Section 18(a)(i) and less three (3) business days for all other Events of Default under the Master Lease. Notwithstanding anything to the contrary in the Master Lease or this Sublease, Subtenant shall be entitled to a grace period of five (5) days for the first (1st) two (2) late payments of Rent in any calendar year during the Term, so long as such late payments are each received within such five (5) day grace period.

 

9.                                       Remedies . In the event of any default of this Sublease by Subtenant beyond any notice and cure period, Sublandlord shall have all remedies provided to the “Landlord” in the Master Lease as if an Event of Default had occurred thereunder and all other rights and remedies otherwise available at law and in equity. Without limiting the generality of the foregoing, Sublandlord may continue this Sublease in effect after Subtenant’s breach and abandonment and recover Rent as it becomes due. Sublandlord may resort to its remedies cumulatively or in the alternative.

 

10.                                Right to Cure Defaults .

 

10.1                         Subtenant Default . If Subtenant fails to perform any of its obligations under this Sublease after expiration of applicable grace or cure periods, then Sublandlord may, but shall not be obligated to, perform any such obligations for Subtenant’s account. All costs and expenses incurred by Sublandlord in performing any such act for the account of Subtenant shall be deemed Rent payable by Subtenant to Sublandlord upon demand, together with interest thereon at the lesser of (i) five percent (5%) per annum or (ii) the maximum rate allowable under law from the date of demand to Subtenant until repaid. If Sublandlord undertakes to perform any of Subtenant’s obligations for the account of Subtenant pursuant hereto, the taking of such action

 

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shall not constitute a waiver of any of Sublandlord’s remedies. Subtenant hereby expressly waives its rights under any statute to make repairs at the expense of Sublandlord.

 

10.2                         Sublandlord Default . Sublandlord hereby irrevocably authorizes and directs Subtenant, upon receipt of any written notice from Master Landlord stating that a default exists in the performance of Sublandlord’s obligations under the Master Lease, to pay to Master Landlord the rents due and to become due under this Sublease. Sublandlord agrees that Subtenant shall have the right to rely upon any such statement and request from Master Landlord, and that Subtenant shall pay such rents to Master Landlord without any obligation to inquire as to whether such default exists and notwithstanding any notice or claim from Sublandlord to the contrary, and Sublandlord shall have no right or claim against Subtenant for any such rents so paid by Subtenant.

 

11.                                Consents and Approvals . Except as otherwise provided herein, Sublandlord shall not unreasonably withhold, or delay its consent to or approval of a matter requiring Sublandlord’s consent hereunder. In the event Landlord’s consent is required hereunder, Sublandlord hereby agrees to cooperate with Subtenant in seeking such consent, including, without limitation, delivering any applicable documentation requested by Subtenant.

 

12.                                Sublandlord’s Liability . Notwithstanding any other term or provision of this Sublease, the liability of Sublandlord to Subtenant for any default in Sublandlord’s obligations under this Sublease shall be limited to actual, direct damages, and under no circumstances shall Subtenant, its partners, members, shareholders, directors, agents, officers, employees, contractors, sublessees, successors and/or assigns be entitled to recover from Sublandlord (or otherwise be indemnified by Sublandlord) for (a) any losses, costs, claims, causes of action, damages or other liability incurred in connection with a failure of Master Landlord, its partners, members, shareholders, directors, agents, officers, employees, contractors, successors and/or assigns to perform or cause to be performed Master Landlord’s obligations under the Master Lease, except to the extent caused by Sublandlord or Sublandlord’s breach of this Sublease or the Master Lease, (b) lost revenues, lost profit or other consequential, special or punitive damages arising in connection with this Sublease for any reason, or (c) any damages or other liability arising from or incurred in connection with the condition of the Subleased Premises or suitability of the Subleased Premises for Subtenant’s intended uses, except to the extent caused by the gross negligence or willful misconduct of Sublandlord or Sublandlord’s breach of this Sublease or the Master Lease. Notwithstanding any other term or provision of this Sublease, no personal liability shall at any time be asserted or enforceable against Sublandlord’s stockholders, directors, officers, or partners on account of any of Sublandlord’s obligations or actions under this Sublease. As used in this Sublease, the term “Sublandlord” means the holder of Sublandlord’s interest under this Sublease. In the event of any assignment or transfer of the Sublandlord’s interest under this Sublease, which assignment or transfer may occur at any time during the Term in Sublandlord’s sole discretion, Sublandlord shall be and hereby is entirely relieved of all covenants and obligations of Sublandlord hereunder accruing subsequent to the date of the transfer and it shall be deemed and construed, without further agreement between the parties hereto, that any transferee has assumed and shall carry out all covenants and obligations thereafter to be performed by Sublandlord hereunder, provided that Sublandlord has delivered the Security Deposit to the transferee and the transferee has expressly assumed Sublandlord’s obligations under this Sublease. Sublandlord shall transfer and deliver (i) any then-existing

 

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Security Deposit to the transferee of Sublandlord’s interest under this Sublease, (ii) the written assumption of this Sublease and the Master Lease by Transferee, and (iii) written notice to Subtenant identifying the amount of the Security Deposit transferred and the name and address of the transferee, and, provided that the entire remaining amount of the Security Deposit has been transferred, Sublandlord shall be discharged from any further liability with respect thereto.

 

13.                                Indemnities .

 

13.1                         Indemnification of Sublandlord . Except to the extent caused by the negligence or willful misconduct of Sublandlord, its agents, employees, contractors or invitees, Subtenant shall indemnify, defend, protect and hold Sublandlord harmless from and against any and all claims, liabilities, judgments, causes of action, damages, injuries, costs and expenses (including reasonable attorneys’ and experts’ fees), by whomsoever made, incurred or suffered, and caused by or arising in connection with: (i) the use or occupancy of the Subleased Premises by Subtenant; (ii) the negligence or willful misconduct of Subtenant or its employees, contractors, agents or invitees; or (iii) a material breach of Subtenant’s obligations under this Sublease or the provisions of the Master Lease assumed by Subtenant hereunder. Subtenant’s indemnification of Sublandlord shall survive termination of this Sublease.

 

13.2                         Indemnification of Subtenant . Subject to Section 12 above and except to the extent caused by the negligence or willful misconduct of Subtenant, its agents, employees, contractors or invitees, Sublandlord shall indemnify, defend, protect and hold Subtenant harmless from and against any and all claims, liabilities, judgments, causes of action, damages, injuries, costs and expenses (including reasonable attorneys’ and experts’ fees), by whomsoever made, incurred or suffered, and caused by or arising in connection with (i) any material breach of Sublandlord’s obligations under this Sublease; (ii) any material breach of Sublandlord’s obligations under the Master Lease which Sublandlord is required to perform; or (iii) the negligence or willful misconduct of Sublandlord or its employees, contractors, agents or invitees. Sublandlord’s indemnification of Subtenant shall survive termination of this Sublease.

 

13.3                         Control of Defense and Attorneys’ Fees .  The party seeking indemnification under this Sublease (the “Indemnified Party”) shall promptly notify the other party (the “Indemnifying Party”) in writing of the claim and provide reasonable assistance in connection with the defense and settlement thereof. The Indemnifying Party shall be entitled to control the defense and settlement thereof unless it fails to take up such defense within a reasonable period of time. The Indemnifying Party shall not arrive at a settlement which adversely affects the Indemnified Party without the prior written consent of the Indemnified Party, such consent not to be unreasonably withheld, conditioned, or delayed. Failure to provide prompt notice shall not absolve the Indemnifying Party of its obligation to indemnify, provided however, it shall be excused from any incremental loss arising solely from such failure to notify. If Sublandlord or Subtenant brings an action to enforce the terms hereof or to declare rights hereunder, the prevailing party who recovers substantially all of the damages, equitable relief or other remedy sought in any such action on trial and appeal shall be entitled to receive from the other party its costs associated therewith, including, but not limited to, reasonable attorney’s fees, expert fees, and court costs from the other party.

 

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14.                                Delivery of Possession .

 

14.1                         Timing . Sublandlord will deliver possession of the Premises to Subtenant on the Commencement Date (subject to the provisions of Section 2(b)). Sublandlord shall use commercially reasonable efforts to complete the Sublandlord Work on or before January 1, 2015. If, for any reason whatsoever, the Sublandlord Work has not been substantially completed on or before February 15, 2015, then, in addition to Subtenant’s other rights and remedies, Subtenant shall be entitled to a credit against rent in the amount of $2,185.00 for each day that substantial completion of the Sublandlord Work is delayed beyond February 15, 2015; and if the Sublandlord Work has not been substantially completed on or before March 15, 2015 (which date may be extended in Subtenant’s sole and absolute discretion), then, in addition to Subtenant’s other rights and remedies, after March 15, 2015, Subtenant may elect to terminate this Sublease, which termination will be effective ten (10) days after written notice to Sublandlord, whereupon the Security Deposit and any pre-paid rent will be returned to Subtenant.

 

14.2                         Condition . Sublandlord will, at Sublandlord’s sole expense, have the Premises professionally cleaned prior to the Commencement Date. Further, Sublandlord will promptly complete the following work (“Sublandlord Work”): (a) install commercially reasonable separation between the stairwell connecting the Subleased Premises with the remainder of the Master Premises, and install separation along the guardrails. Except as set forth in this Section 14.2, Sublandlord shall deliver, and Subtenant shall accept, possession of the Subleased Premises in their “AS IS” condition as the Subleased Premises exists on the date hereof. Except as set forth in this Section 14.2 and Section 28, Sublandlord shall have no obligation to furnish, render or supply any work, labor, services, materials, furniture, fixtures, equipment, decorations or other items to make the Subleased Premises ready or suitable for Subtenant’s occupancy. In making and executing this Sublease, Subtenant has relied solely on such investigations, examinations and inspections as Subtenant has chosen to make or has made and has not relied on any representation or warranty concerning the Subleased Premises or the Building, except as expressly set forth in this Sublease. Subtenant acknowledges that Sublandlord has afforded Subtenant the opportunity for full and complete investigations, examinations and inspections of the Subleased Premises and the common areas of the Building. Subtenant acknowledges that it is not authorized to make or do any alterations or improvements in or to the Subleased Premises except as permitted by the provisions of this Sublease and the Master Lease.

 

15.                                Surrender and Holding Over .

 

15.1                         Prior to expiration of this Sublease, Subtenant shall surrender the Subleased Premises to Sublandlord in the same condition existing at the Commencement Date, ordinary wear and tear, Sublandlord’s or Master Landlord’s alterations and repair and maintenance obligations, casualties, condemnation, and alterations or other interior improvements made by Sublandlord, excepted.

 

15.2                         If Subtenant fails to surrender the Subleased Premises at the expiration or earlier termination of this Sublease, occupancy of the Subleased Premises after the termination or expiration shall be that of a tenancy at sufferance. Subtenant’s occupancy of the Subleased

 

12



 

Premises during the holdover shall be subject to all the terms and provisions of this Sublease and Subtenant shall pay an amount equal to 200% of the sum of the Base Rent and Additional Rent due for the period immediately preceding the holdover. No holdover by Subtenant or payment by Subtenant after the expiration or early termination of this Sublease shall be construed to extend the Term or prevent Sublandlord from immediate recovery of possession of the Subleased Premises by summary proceedings or otherwise. In addition to the payment of the amounts provided above, if Subtenant holds over for a period in excess of thirty (30) days beyond the Expiration Date and Sublandlord is unable to deliver possession of the Subleased Premises to a new subtenant or to Landlord, as the case may be, or to perform improvements for a new subtenant, as a result of Subtenant’s holdover, Subtenant shall be liable to Sublandlord for all out-of-pocket damages, including, without limitation, consequential damages, that Sublandlord suffers from the holdover; Subtenant expressly acknowledges that such damages may include all of the holdover rent charged by Landlord under the Master Lease as a result of Subtenant’s holdover, which Master Lease holdover rent may apply to the entire Master Lease Premises.

 

16.                                Parking . Subtenant shall have the right to use twelve (12) of Sublandlord’s unreserved parking spaces in the Parking Lot (“Subtenant’s Allotted Spaces”). Subtenant’s use of Subtenant’s Allotted Spaces is subject to, and Subtenant shall use Subtenant’s Allotted Spaces in full compliance with, all restrictions and provisions set forth in Section 25 of the Master Lease. Without limiting the foregoing, the use of Subtenant’s Allotted Spaces shall be for the parking of motor vehicles used by Subtenant, its officers, employees and customers only, and shall be subject to all applicable laws and the reasonable, uniform and non- discriminatory rules and regulations adopted by Landlord from time to time for the use of the Parking Lot, and upon the expiration or earlier termination of this Sublease, Subtenant’s rights with respect to all leased parking spaces shall immediately terminate. Subtenant and its agents, employees, contractors, invitees or licensees shall not unreasonably interfere with the rights of Landlord, Sublandlord or others entitled to similar use of the Parking Lot. On a semi-annual basis (January through June and July through December), Subtenant shall notify Sublandlord in writing as to the number of Subtenant’s Allocated Spaces that Subtenant will utilize during that semi-annual period, such number to be the same for every day of the semi-annual period, subject to a minimum of ten (10) spaces (the “Noticed Spaces”). For the first partial calendar year hereunder (Commencement Date through June 30, 2015), Subtenant shall specify the number of Noticed Spaces in a written notice to Sublandlord no later than the Commencement Date. For all subsequent semi-annual periods, Subtenant shall give its written notice no later than either May 30 for the semi-annual period commencing on July 1 or November 30 for the semi-annual period commencing on January 1. As consideration for the parking rights granted herein, Subtenant shall pay to Sublandlord a monthly “Sublease Parking Rental” equal to the number of Noticed Spaces times the monthly per-space Parking Rental paid by Sublandlord from time to time under the terms of the Master Lease. Sublease Parking Rental shall be due and payable in advance, as additional rent, on the first day of each month during the Term.

 

17.                                Notices . Any notice by either party to the other required, permitted or provided for herein shall be valid only if in writing and shall be deemed to be duly given only if (a) delivered personally, or (b) sent by means of Federal Express, UPS Next Day Air or another reputable express mail delivery service guaranteeing next day delivery, or (c) sent by United States Certified or registered mail, return receipt requested, addressed:

 

13



 

if to Sublandlord, at the following addresses:

 

InMobi Inc.

475 Brannan Street, Suite 410
San Francisco, CA 94107
Attn: Ms. Anne Frisbie

Lease Notice - Important

 

and

 

InMobi Pte. Ltd. 20
Cecil Street

14-01 Equity Plaza
Singapore 049705

Attn: Sharat Kharuna

 

if to Subtenant, at the following address:

 

Prior to the date Subtenant opens for business at the Subleased Premises:

 

Invitae Corporation
458 Brannan Street
San Francisco, CA, 94107

Attn: Robbie Evans

 

After Subtenant opens for business at the Subleased Premises:

The Premises

 

with a copy to:

 

Invitae Corporation
458 Brannan Street
San Francisco, CA, 94107

Attn: Robbie Evans

 

or at such other address for either party as that party may designate by notice to the other. A notice shall be deemed given and effective upon receipt or refusal of receipt.

 

18.                                Signage . Subject to procuring the prior written approval of both Sublandlord, which shall not be unreasonably withheld or delayed, and Landlord in accordance with the terms of the Master Lease, Subtenant shall have the right to have Subtenant’s name on the directory board in the lobby of the Building and on the Building stand and signage in the elevator lobby of the fourth floor, and to have Building standard signage on the door to the Subleased Premises, as permitted and defined in the Master Lease.

 

19.                                Brokers . Subtenant represents that it has dealt directly with and only with CBRE, Inc. (“Subtenant’s Broker”), as a broker in connection with this Sublease. Sublandlord

 

14



 

represents that it has dealt directly with and only with CBRE, Inc. (“Sublandlord’s Broker”), as a broker in connection with this Sublease. Sublandlord and Subtenant shall indemnify, defend, and hold each other harmless from all claims of any brokers other than Subtenant’s Broker and Sublandlord’s Broker claiming to have represented Sublandlord or Subtenant in connection with this Sublease. Subtenant and Sublandlord agree that Subtenant’s Broker and Sublandlord’s Broker shall be paid commissions by Sublandlord in connection with this Sublease pursuant to a separate agreement.

 

20.                                Conditions Precedent . This Sublease and Sublandlord’s and Subtenant’s obligations hereunder are conditioned upon the written consent of Landlord in a form reasonably acceptable to Subtenant and which includes (unless waived in whole or in part by Subtenant) Landlord’s agreement that the provisions of Section 12(e) and 12(f) of the Master Lease shall apply for the benefit of Subtenant (with references therein to “Tenant” and “the initially named Tenant “ deemed to be references to Subtenant) such that Subtenant shall be permitted to sublease or assign to “Affiliates” of Subtenant in accordance with such Section 12(e) and engage in Approved Reorganizations in accordance with such Section 12(f). Sublandlord shall use commercially reasonable efforts to obtain Landlord’s consent to this Sublease.

 

21.                                Complete Agreement . There are no representations, warranties, agreements, arrangements or understandings, oral or written, between the parties or their representatives relating to the subject matter of this Sublease which are not fully expressed in this Sublease. This Sublease cannot be changed or terminated nor may any of its provisions be waived orally or in any manner other than by a written agreement executed by both parties.

 

22.                                Interpretation . Irrespective of the place of execution or performance, this Sublease shall be governed by and construed in accordance with the laws of the State of California. If any provision of this Sublease or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, the remainder of this Sublease and the application of that provision to other persons or circumstances shall not be affected but rather shall be enforced to the extent permitted by law. The table of contents, captions, headings and titles, if any, in this Sublease are solely for convenience of reference and shall not affect its interpretation. This Sublease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Sublease or any part thereof to be drafted. If any words or phrases in this Sublease shall have been stricken out or otherwise eliminated, whether or not any other words or phrases have been added, this Sublease shall be construed as if the words or phrases so stricken out or otherwise eliminated were never included in this Sublease and no implication or inference shall be drawn from the fact that said words or phrases were so stricken out or otherwise eliminated. Each covenant, agreement, obligation or other provision of this Sublease shall be deemed and construed as a separate and independent covenant of the party bound by, undertaking or making same, not dependent on any other provision of this Sublease unless otherwise expressly provided. All terms and words used in this Sublease, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. The word “person” as used in this Sublease shall mean a natural person or persons, a partnership, a corporation or any other form of business or legal association or entity.

 

15



 

23.                                Counterparts . This Sublease may be executed in separate counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. This Sublease shall be fully executed when each party whose signature is required has signed and delivered to each of the parties at least one counterpart, even though no single counterpart contains the signatures of all parties hereto.

 

24.                                Quiet Enjoyment . Subject to the terms and conditions of the Master Lease (including Master Landlord’s rights thereunder) and the terms and conditions of this Sublease (including Sublandlord’s rights hereunder), so long as Subtenant is not in default under this Sublease beyond any notice and cure periods, Subtenant’s right to occupy the Sublease Premises shall not be disturbed by Sublandlord or any entity or person claiming by, through, or under Sublandlord, during the Term.

 

25.                                Authority to Execute . Subtenant and Sublandlord each represent and warrant to the other that each person executing this Sublease on behalf of each party is duly authorized to execute and deliver this Sublease on behalf of that party.

 

26.                                Recitals and Exhibits . The Recitals and the Exhibits to this Sublease are integral and operative provisions of this Sublease and are incorporated herein.

 

27.                                Right of First Offer to Expand . Subtenant will have an on-going Right of First Offer (the “Right of First Offer”) with respect to any space subleased by Sublandlord. Sublandlord will provide written notice (the “Offer Notice”) to Subtenant when any such space becomes available for sublease (the “Offer Space”), which Offer Notice will describe the Offer Space and the proposed rent for the Offer Space, which will be the fair market rent to sublease the Offer Space as of the proposed commencement date. Subtenant shall have ten (10) business days from receipt of the Offer Notice to notify Sublandlord that Subtenant will (a) accept all or any portion of the Offer Space on the financial terms offered, (b) accept all or any portion of the Offer Space but elect to submit the determination of the fair market rent to binding arbitration by JAMS in San Francisco, in accordance with its comprehensive arbitration rules, or (c) decline to sublease the Offer Space. If Subtenant does not notify Sublandlord of its election in writing within said ten (10) business day period, then Sublandlord thereafter shall have the right to sublease the Offer Space to a third party on any terms Sublandlord desires. If Sublandlord subleases any or all of the Offer Space, the parties will promptly execute an amendment incorporating the additional subleased Offer Space as part of the “Subleased Premises” and the terms and conditions of this Sublease shall apply to such subleased Offer Space, including the Expiration Date. If Sublandlord does not sublease the Offer Space within ninety (90) days after the expiration of said ten (10) business day period, any further transaction shall be deemed a new determination by Sublandlord to lease the Offer Space and the provisions of this paragraph shall again be applicable. Subtenant’s Right of First Offer shall be continuous during the Term of this Sublease. Subtenant’s rejection of any particular offer shall not relieve Sublandlord of its obligation to again offer any Offer Space to Subtenant at any time that any Offer Space subsequently becomes available.

 

28.                                Furniture . Subtenant shall have the right to use during the Term the office furnishings within the Subleased Premises which are identified on Exhibit D attached hereto (the “Furniture”) at no additional cost to Subtenant. If Subtenant provides written notice to

 

16



 

Sublandlord that Subtenant desires any one or more items of the Furniture to be removed from the Subleased Premises, then Sublandlord will remove such items from the Subleased Premises at Sublandlord’s expense, such removal to be completed by Sublandlord within the following timeframes: (a) prior to the Commencement Date, if Sublandlord receives any such notice within thirty (30) days prior to the Commencement Date, and (b) no later than thirty (30) days following written notice from Subtenant if Sublandlord receives such notice during the Term. Upon any such removal, the term “Furniture” shall be deemed to exclude such removed items. Subtenant shall maintain the Furniture in good condition and repair and shall surrender the Furniture to Sublandlord upon the termination of this Sublease in the same condition as exists as of the Commencement Date, reasonable wear and tear, casualty, and condemnation excepted.

 

29.                                Cabling . During the Term, and subject to Master Landlord’s consent, Subtenant shall have the right to install, maintain, replace, and remove network cabling for the benefit of the Subleased Premises (the “Cabling”) in Sublandlord’s server room located in the remaining Master Lease Premises. Subtenant’s installation, maintenance, replacement or removal of such Cabling shall not interfere with Sublandlord’s cabling or the functionality of its server room. Sublandlord and Subtenant shall cooperate in good faith to allow Subtenant to access the server room for the installation, maintenance, replacement, and removal of the Cabling permitted by this Section 29. Subtenant shall be required to remove the Cabling prior to surrendering the Subleased Premises pursuant to Section 15.1.

 

[Signatures follow on next page.]

 

17


IN WITNESS WHEREOF, the parties hereto hereby execute this Sublease as of the day and year first above written.

 

 

SUBLANDLORD:

 

 

 

INMOBI INC.,

 

a Delaware corporation

 

 

 

 

 

 

By:

/s/ Amit Gupta

 

Name:

Amit Gupta

 

Title:

Co-founder

 

 

 

 

 

SUBTENANT:

 

 

 

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

 

 

 

By:

/s/ Lee Bendekgey

 

Name:

Lee Bendekgey

 

Title:

CFO

 

18



 

EXHIBIT A to SUBLEASE

 

Master Lease

 

Exhibit A



 

OFFICE LEASE
SUMMARY OF LEASE TERMS

 

475 Brannan Street
San Francisco, California

 

A.

 

Date:

 

March 26, 2012

 

 

 

 

 

B.

 

Landlord:

 

PRU/SKS Brannan Associates, LLC, a

 

 

 

 

Delaware limited liability company

 

 

 

 

 

 

 

Landlord’s address for notices:

[Paragraph 23(k)]

 

c/o The Prudential Insurance Company of America

4 Embarcadero Center, 27 th  Floor

San Francisco, CA 94111

Attn: PRISA II Asset Manager

 

 

 

 

 

 

 

 

 

c/o The Prudential Insurance Company of America

 

 

 

 

8 Campus Drive, 4 th  Floor

 

 

 

 

Parsippany, New Jersey 07054

 

 

 

 

Attn: Greg Shanklin, Esquire

 

 

 

 

 

 

 

 

 

c/o SKS Investments LLC

 

 

 

 

601 California Street, Suite 1310

 

 

 

 

San Francisco, CA 94108

 

 

 

 

Attn: Ms. Pamela Izzo

 

 

 

 

 

C.

 

Tenant:

 

INMOBI INC., a Delaware corporation

 

 

 

 

 

 

 

Tenant’s address for notices:

 

475 Brannan Street, Suite 310

 

 

[Paragraph 23(k)]

 

San Francisco, California

 

 

 

 

Attn: Lease Notice - Important

 

 

 

 

 

 

 

 

 

InMobi Inc.

 

 

 

 

20 CECIL ST. 14-01 EQUITY PLAZA

SINGAPORE 049705

 

 

 

 

Attn: Sharat Kharuna

 

 

 

 

 

 

 

Tenant Contact Person:

 

Sharat Kharuna

 

 

 

 

 

D.

 

Floor(s) on which Premises are situated: [Paragraph 1(f)]

 

3 rd  and 4 th  floors; Suites 310, 410 and 420

 

 

 

 

 

E.

 

Rentable area of Premises:

 

39,372 square feet.

 

i



 

 

 

[Paragraph 1(f)]

 

 

 

 

 

 

 

F.

 

Tenant’s Percentage Share:

 

16.11%

 

 

[Paragraph 1(j)]

 

 

 

 

 

 

 

G.

 

Base Year: [Paragraph 1(a)]

 

2012

 

 

Tax Base Year: [Paragraph 1(a)]

 

Tax Fiscal Year from 7/1/2012 - 6/30/2013

 

 

 

 

 

H.

 

Term; [Paragraph 2]

 

Period that begins on the Commencement Date and ending on the last day of the 60th month following the Commencement Date, subject to extension for 60 months as provided in Paragraph 2*


 

 

 

 

* Term with respect to the Suite 420 Premises shall be as provided in Paragraph 2(a).

 

 

 

 

 

 

I.

 

Basic Monthly Rental:

 

Months 1 – 12

$170,612.00*

 

 

[Paragraph 3(a)]

 

Months 13 – 24:

$175,730.36

 

 

 

 

Months 25 – 36:

$181,002.27

 

 

 

 

Months 37 – 48:

$186,432.34

 

 

 

 

Month 49 –

 

 

 

 

 

Expiration of

 

 

 

 

 

Initial Term:

$192,025.31

 

 

 

 

 

 


 

 

 

 

* Basic Monthly Rental with respect to the Suite 420 Premises prior to the Commencement Date shall be as provided in Paragraph 3(a).

 

 

 

 

 

J.

 

Letter of Credit Required Amount:

[Paragraph 26(a)]

 

$682,448.00, subject to reduction as provided in Paragraph 26(a).

 

 

 

 

 

K.

 

Brokers:

[Paragraph 23(q)]

 

Colliers International (“Landlord’s Broker”) Cassidy Turley/BT Commercial (“Tenant’s Broker”)

 

 

 

 

 

L.

 

Exhibits and addenda:

 

Exhibit A -

Floor Plan

 

 

[Paragraph 23(u)]

 

Exhibit B -

Building Rules and Regulations

 

 

 

 

Exhibit C -

Tenant Work Letter

 

 

 

 

Exhibit D -

Commencement Date Memorandum

 

 

 

 

Exhibit E -

Form of Letter of Credit

 

 

 

 

Exhibit F -

Included Personal Property

 

 

 

 

Exhibit G -

Lease Guaranty

 

 

 

 

 

 

M.

 

Guarantor:

[Paragraph 30]

 

InMobi Pte Ltd., Singapore

 

ii



 

The provisions of the Lease identified above in brackets are those provisions where references to particular Lease Terms appear. Each such reference shall incorporate the applicable Lease Terms. In the event of any conflict between the Summary of Lease Terms and the Lease, the latter shall control.

 

 

LANDLORD :

 

 

 

PRU/SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company

 

 

 

 

By

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, its Managing Member

 

 

 

 

 

 

By:

 

 

 

Its:

 

 

iii



 

 

TENANT :

 

 

 

INMOBI INC., a Delaware corporation

 

 

 

By:

 

 

Its:

 

 

 

 

 

By:

 

 

Its:

 

 

iv



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

1.

DEFINITIONS

1

 

 

 

2.

TERM

5

 

 

 

3.

RENTAL; SECURITY DEPOSIT

9

 

 

 

4.

TENANT’S SHARE OF OPERATING EXPENSES AND REAL PROPERTY TAXES; ADDITIONAL RENT

11

 

 

 

5.

OTHER TAXES PAYABLE BY TENANT

13

 

 

 

6.

USE

13

 

 

 

7.

COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS

14

 

 

 

8.

ALTERATIONS; LIENS

17

 

 

 

9.

MAINTENANCE AND REPAIR

18

 

 

 

10.

SERVICES

18

 

 

 

11.

SECURITY; ACCESS; CONTROL

20

 

 

 

12.

ASSIGNMENT AND SUBLETTING

22

 

 

 

13.

WAIVER; INDEMNIFICATION

27

 

 

 

14.

INSURANCE

28

 

 

 

15.

PROTECTION OF LENDERS

29

 

 

 

16.

ENTRY BY LANDLORD

30

 

 

 

17.

ABANDONMENT

31

 

 

 

18.

DEFAULT AND REMEDIES

31

 

 

 

19.

DAMAGE BY FIRE OR OTHER CASUALTY

34

 

 

 

20.

EMINENT DOMAIN

36

 

 

 

21.

HOLDING OVER

37

 

 

 

22.

INTENTIONALLY OMITTED

37

 

 

 

23.

MISCELLANEOUS

37

 

i



 

24.

ERISA

43

 

 

 

25.

PARKING

43

 

 

 

26.

LETTER OF CREDIT

44

 

 

 

27.

[INTENTIONALLY OMITTED]

49

 

 

 

28.

TENANT’S RIGHT OF FIRST NOTIFICATION

49

 

 

 

29.

PERSONAL PROPERTY

49

 

 

 

30.

GUARANTY

50

 

 

 

EXHIBIT A-1

SUITES 310/410 PREMISES FLOOR PLAN

 

 

EXHIBIT A-2

SUITE 420 PREMISES FLOOR PLAN

 

 

EXHIBIT B

BUILDING RULES AND REGULATIONS

 

 

EXHIBIT C

TENANT WORK LETTER

 

 

EXHIBIT D

COMMENCEMENT DATE MEMORANDUM

 

 

EXHIBIT E

FORM OF LETTER OF CREDIT

 

 

EXHIBIT F

INCLUDED PERSONAL PROPERTY

 

 

EXHIBIT G

LEASE GUARANTY

 

ii



 

475 BRANNAN STREET

 

OFFICE LEASE

 

THIS LEASE is dated as of the date stated in Paragraph A of the Summary of Basic Lease Terms between PRU/SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company (“Landlord”), and INMOBI INC., a Delaware corporation (“Tenant”).

 

W I T N E S S E T H:

 

Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises described in Paragraph 1(f) below, for the term and subject to the terms, covenants, agreements and conditions hereinafter set forth.

 

1.                                       DEFINITIONS.

 

In addition to terms that are defined elsewhere in this Lease, unless the context otherwise specifies or requires, the following terms shall have the meanings herein specified:

 

(a)                                  The term “Base Year” shall mean calendar year 2012 and the term “Tax Base Year” shall mean the tax fiscal year from July 1, 2012, through June 30, 2013..

 

(b)                                  The term “Building” shall mean the office building located at 475 Brannan Street in San Francisco, California.

 

(c)                                   The term “Expense Year” shall mean each calendar year in which any portion of the Lease term falls, through and including the calendar year in which the term expires; provided, however, that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in such event, Tenant’s Percentage Share of increases in Real Property Taxes over the Tax Base Year amounts and Operating Expenses over the Base Year amounts shall be equitably adjusted for any Expense Year involved in any such change.

 

(d)                                  The term “Land” means the parcel(s) of land on which the Building and the adjacent below-grade parking lot (“Parking Lot”) are located.

 

(e)                                   The term “Operating Expenses” shall mean the total costs and expenses incurred by Landlord in connection with the management, operation, maintenance, repair and ownership of the Real Property (as defined in Paragraph 1(g) hereof), including, without limitation, the following costs: (1) salaries, wages, bonuses and other compensation (including hospitalization, medical, surgical, retirement plan, pension plan, union dues, parking privileges, life insurance, including group life insurance, welfare and other fringe benefits, and vacation, holidays and other paid absence benefits) relating to employees of Landlord or its agents engaged in the management, operation, repair, or maintenance of the Real Property and costs of training such employees; (2) payroll, social security, workers’ compensation, unemployment and similar taxes with respect to such employees of Landlord or its agents, and the cost of providing disability or other benefits imposed by law or otherwise, with respect to such employees;

 

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(3) uniforms (including the cleaning, replacement and pressing thereof) provided to such employees; (4) premiums and other charges incurred by Landlord with respect to fire, earthquake, other casualty, boiler and machinery, theft, rent interruption, liability insurance, any other insurance as is deemed necessary or advisable in the reasonable judgment of Landlord, or any insurance required by the holder of any Superior Interest (as defined in Paragraph 15), all in such amounts as Landlord determines to be appropriate, and the actual costs incurred in repairing an insured casualty to the extent of the deductible amount under the applicable insurance policy; (5) water charges and sewer rents or fees; (6) license, permit and inspection fees and charges, the cost of contesting any governmental enactments that may affect Operating Expenses, and the costs incurred in connection with any transportation system management program or similar program; (7) sales, use and excise taxes on goods and services purchased by Landlord in connection with the operation, maintenance or repair of the Real Property and building systems and equipment; (8) telephone, telegraph, postage, stationery supplies and other expenses incurred in connection with the operation, maintenance, or repair of the Real Property; (9) management fees and expenses (including fees and expenses for accounting, financial management, data processing and information services) and costs of tenant service programs; (10) repairs to and physical maintenance of the Real Property, including building systems and appurtenances thereto and normal repair and replacement of worn-out equipment, facilities and installations, but excluding the replacement of major building systems (except to the extent otherwise included as an Operating Expense pursuant to this Paragraph 1(e)); (11) janitorial (excluding janitorial service to the Premises and the premises of other tenants), window cleaning, security services, extermination, water treatment, rubbish removal, plumbing and other services and inspection or service contracts for elevator, electrical, mechanical, sanitary, heating, ventilation and air conditioning, and other building equipment and systems or as may otherwise be necessary or proper for the operation or maintenance of the Real Property; (12) supplies, tools, materials and equipment used in connection with the operation, maintenance or repair of the Real Property; (13) accounting, legal and other professional, consulting or service fees and expenses; (14) painting the exterior or the public or common areas of the Building and the cost of maintaining and replacing the sidewalks, landscaping and other common areas of the Real Property; (15) all costs and expenses for electricity, chilled water, air conditioning, water for heating, gas, fuel, steam, heat, lights, sewer service, communications service, power and other energy related utilities required in connection with the operation, maintenance and repair of the Real Property, including the Premises and the premises of other tenants to the extent not separately metered; (16) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord during the term of this Lease required under any governmental law, regulation or insurance requirement, such cost or allocable portion to be amortized over the useful life thereof, together with interest on the unamortized balance at a rate per annum equal to the Reference Rate (as defined in Paragraph 3(c)) charged at the time such capital improvements or capital assets are constructed or acquired or such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing or acquiring such capital improvements or capital assets, but in either case not more than the maximum rate permitted by law at the time such capital improvements or capital assets are constructed or acquired; (17) the cost of any capital improvements made by Landlord to the Building or capital assets acquired by Landlord during the term of this Lease for the protection of the health and safety of the occupants of the Real Property or that are designed to reduce other Operating Expenses, such cost or allocable portion thereof to be amortized over the useful life thereof

 

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(except that Landlord may include as an Operating Expense in any calendar year a portion of the cost of such a capital improvement or capital asset equal to Landlord’s estimate of the amount of the reduction of other Operating Expenses in such year resulting from such capital improvement or capital asset), together with interest on the unamortized balance at a rate per annum equal to the Reference Rate charged at the time such capital improvements or capital assets are constructed or acquired or such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing or acquiring such capital improvements or capital assets, but in either case not more than the maximum rate permitted by law at the time such capital improvements or capital assets are constructed or acquired; (18) the cost of furniture, window coverings, carpeting, decorations, landscaping and other customary and ordinary items of personal property provided by Landlord for use in common areas of the Real Property or in the Building office (to the extent that such Building office is dedicated to the operation and management of the Real Property), such costs to be amortized over the useful life thereof; (19) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord during the term of this Lease to the extent that the cost of any such improvement or asset is less than five thousand dollars ($5,000); (20) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord during the term of this Lease that have a useful life of five (5) years or less (and the cost of which is not otherwise included in Operating Costs pursuant to this Paragraph 1(e)), such cost to be amortized over the useful life thereof, together with interest on the unamortized balance at a rate per annum equal to the Reference Rate charged at the time such capital improvements or capital assets are constructed or acquired or such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing or acquiring such capital improvements or capital assets, but in either case not more than the maximum rate permitted by law at the time such capital improvements or capital assets are constructed or acquired; (21) any such expenses and costs resulting from substitution of work, labor, material or services in lieu of any of the above itemizations, or for any such additional work, labor, services or material resulting from compliance with any governmental laws, rules, regulations or orders applicable to the Real Property or any part thereof; (22) property management office rent or rental value; and (23) cost of operation, repair and maintenance of the Parking Lot, including resurfacing, restriping and cleaning.

 

To the extent costs and expenses described above relate to both the Real Property and other property, such costs and expenses shall, in determining the amount of Operating Expenses, be allocated as Landlord may reasonably determine to be equitable and appropriate.

 

Despite any foregoing provisions to the contrary, Operating Expenses shall not include the following: (i) depreciation on the Building; (ii) debt service; (iii) rental under any ground or underlying lease; (iv) interest (except as expressly provided in this Paragraph 1(e)); (v) Real Property Taxes; (vi) attorneys’ fees and expenses incurred in connection with lease negotiations with prospective Building tenants and in connection with the enforcement of leases; (vii) the cost of any improvements or equipment that would be properly classified as capital expenditures (except for any capital expenditures expressly included in Operating Expenses pursuant to this Paragraph 1(e)); (viii) the cost of decorating, improving for tenant occupancy, painting or redecorating portions of the Building to be demised to tenants; (ix) advertising expenses relating to vacant space; (x) real estate brokers’ or other leasing commissions; or (xii) costs of utilities for tenants’ premises if separately metered; (xiii) the cost of providing any

 

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service directly to and paid directly by any tenant other than through payment of Operating Expenses; (xiv) any costs expressly excluded from Operating Expenses elsewhere in this Lease; (xv) costs of any items for which Landlord receives reimbursement from insurance proceeds or a third party (and insurance proceeds shall be excluded from Operating Expenses in the year in which they are received, except that any deductible amount under any insurance policy shall be included within Operating Expenses); or (xvi) any items paid directly by Tenant under Paragraph 10.

 

(f)                                    The term “Premises” shall mean the space in the Building designated by cross-hatching on the floor plan(s) attached hereto as Exhibits A-1 and A-2 (exclusive of the areas, if any, shown by shading) and situated on the floor(s) of the Building specified in Paragraph D of the Summary of Lease Terms, together with the appurtenant right to the use, in common with others, of lobbies, entrances, stairs, elevators and other public portions of the Building. Landlord and Tenant agree that the Premises contain the number of square feet of rentable area specified in Paragraph E of the Summary of Lease Terms. All the outside walls and windows of the Premises and any space in the Premises used for shafts, stacks, pipes, conduits, ducts, electric or other utilities, sinks or other Building facilities, and the use thereof and access thereto through the Premises for the purposes of operation, maintenance and repairs, are reserved to Landlord.

 

(g)                                   The term “Real Property” shall mean, collectively, the Land, the Building, the Parking Lot, and the other improvements on the Land.

 

(h)                                  The term “Real Property Taxes” shall mean all taxes, assessments (whether general or special), excises, transit charges, housing fund assessments or other housing charges, levies or fees, ordinary or extraordinary, unforeseen as well as foreseen, of any kind, which are assessed, levied, charged, confirmed or imposed on the Real Property or any part thereof, on the Landlord with respect to the Real Property, on the act of entering into this Lease or any other lease of space in the Real Property, on the use or occupancy of the Real Property or any part thereof, with respect to services or utilities consumed in the use, occupancy or operation of the Real Property, or on or measured by the rent payable under this Lease or in connection with the business of renting space in the Real Property, including, without limitation, any gross income tax, gross receipts tax or excise tax levied with respect to the receipt of such rent, by the United States of America, the State of California, the City and County of San Francisco, any political subdivision, public corporation, district or other political or public entity or public authority, and shall also include any other tax, fee or other excise, however described, that may be levied or assessed in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other Real Property Taxes. Real Property Taxes shall include reasonable attorneys’ fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Real Property Taxes.

 

Despite any foregoing provisions to the contrary, Real Property Taxes shall not include (i) income, excess profits, franchise, transfer, inheritance or capital stock taxes, unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other charge that would otherwise constitute a part of Real Property Taxes; (ii) any items included as Operating Expenses; (iii) any taxes included in the Parking Rental under Paragraph 25, or

 

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(iv) any items paid by Tenant under Paragraph 5. Landlord and Tenant acknowledge and agree that certain other buildings exist or encroach upon the Land, that Tenant shall have no liability as to any item of Real Property Taxes attributable or allocable to, or assessed against, buildings other than the Building and that Landlord’s good faith determination of the proper allocation of any item of Real Property Taxes allocable to buildings other than the Building shall be binding on Landlord and Tenant.

 

(i)                                      The term “Rental” shall include the Basic Monthly Rental set forth in Paragraph I of the Summary of Lease Terms, all additional rent, and any other costs or charges payable by Tenant to Landlord hereunder.

 

(j)                                     The term “Suites 310/410 Premises” means the portion of the Premises commonly known as Suites 310 and 410 and shown on Exhibit A-1 attached hereto.

 

(k)                                  The term “Suite 420 Premises” means the portion of the Premises commonly known as Suite 420 and shown on Exhibit A-2 attached hereto.

 

(l)                                      The term “Tenant’s Percentage Share” shall mean the percentage figure specified in Paragraph F of the Summary of Lease Terms (subject to Landlord’s right, from time to time, to adjust such percentage to reflect accurate measurements of the Premises or other portions of the Building and/or to reflect changes in Landlord’s standard common area load factor).

 

2.                                       TERM.

 

(a)                                  Subject to Paragraphs 2(c) and 2(d) hereof, the term of this Lease (the “Term”) with respect to the Suite 420 Premises shall commence on the date (the “Suite 420 Commencement Date”) that is the earlier of (i) the date Tenant commences business operations in the Suite 420 Premises, and (ii) the date that is thirty (30) days after Landlord delivers possession of the Suite 420 Premises to Tenant, and the Term with respect to the Suites 310/410 Premises shall commence on the date (the “Commencement Date”) that is thirty (30) days after Landlord delivers possession of the Suites 310/410 Premises to Tenant, and, unless ended sooner as herein provided, shall expire on the last day of the sixtieth (60 th ) month following the Commencement Date. For purposes of this Section 2(a), Tenant shall not be deemed to have commenced business operations in the Suite 420 Premises by reason of having conducted meetings in the Suite 420 Premises on no more than two days. Landlord and Tenant hereby agree to confirm the actual Commencement Date and Expiration Date promptly after the commencement of the Term, by executing and delivering to each other counterparts of a Commencement Date Memorandum in the form of Exhibit D attached hereto, but the Term of this Lease shall commence on the Suite 420 Commencement Date and end on the Expiration Date whether or not such amendment is executed.

 

(b)                                  Tenant shall cause to be constructed or installed in the Premises the Tenant Improvements in accordance with the terms of the Tenant Work Letter attached hereto as Exhibit C. Landlord shall deliver possession of the Premises to Tenant following termination of the existing lease of the Premises to another tenant and the surrender of possession of the Premises to Landlord by that other tenant (and any subtenants or other occupants of that other

 

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tenant). Landlord shall notify Tenant no later than three (3) business days prior to the each of the respective dates on which it intends to deliver the Suite 420 Premises and the Suites 310/410 Premises; such notifications shall be made to Tenant at 1200 Park Place, Suite 290 San Mateo, CA 94403, Attn: 475 Brannan Delivery Notice.

 

(c)                                   If Landlord fails to deliver the entire Premises to Tenant within sixty (60) days after the execution of this Lease and does not cure such failure within fifteen (15) days of Tenant’s written notice thereof (“Tenant’s Full Premises Delivery Notice”), Tenant shall have the option to terminate this Lease upon written notice to Landlord within fifteen (15) days of the expiration of Tenant’s Full Premises Delivery Notice. If Tenant does not exercise its option to terminate the Lease under this Paragraph 2(c), this Lease thereafter shall not be void or voidable and no obligation of Tenant shall be affected by Landlord’s failure to deliver the Premises; provided that, until Landlord’s delivery of the Premises to Tenant, Tenant shall have no obligations under this Lease concerning the Rental payable hereunder or otherwise relating to occupancy of the Premises (excepting the obligation concerning payment of Basic Monthly Rental upon execution of this Lease as provided in Paragraph 3(d) and the obligation to pay Basic Monthly Rental with respect to each portion of the Premises that has been delivered Tenant). Regardless of whether Tenant exercises its option to terminate under this Paragraph 2(c), in no event shall Landlord be liable to Tenant for any loss or damage resulting from Landlord’s failure to deliver the Premises.

 

(d)                                  If either:

 

(A) Landlord has delivered the Suite 420 Premises to Tenant within sixty (60) days after the execution of this Lease but fails to deliver the Suites 310/410 Premises to Tenant within ninety (90) days after the execution of this Lease and does not cure such failure within fifteen (15) days of Tenant’s written notice thereof (“Partial Delivery Notice”), or

 

(B) Landlord has delivered the Suites 310/410 Premises to Tenant within sixty (60) days after the execution of this Lease but fails to deliver the Suite 420 Premises to Tenant within ninety (90) days after the execution of this Lease and does not cure such failure within fifteen (15) days of Tenant’s written notice thereof (also, a “Partial Delivery Notice”), then Tenant shall have the option to terminate this Lease with respect to the portion of the Premises that remains undelivered upon written notice to Landlord within fifteen (15) days of the expiration of the Partial Delivery Notice.

 

In the event of such partial termination, the following changes shall be made to the Lease (which changes shall be promptly documented in an amendment executed by Landlord and Tenant, but which amendment shall not be necessary in order for such changes to be effective):

 

Premises remaining

 

Suite 420

 

Suites 310/410

Commencement Date

 

Suite 420 Commencement Date

 

Commencement Date

Term

 

Suite 420 Commencement Date to last day of 60th month

 

Commencement Date to last day of 60th month following

 

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following Suite 420 Commencement Date, subject to extension per Paragraph 2

 

Commencement Date, subject to extension per Paragraph 2

Rentable area of Premises

 

14,818 sq. feet

 

24,554 sq. feet

Tenant’s Percentage Share

 

6.063%

 

10.047%

Basic Monthly Rental

 

Months 1 – 12: $64,211.33
Months 13 – 24: $66,137.67

Months 25 – 36: $68,121.80

Months 37 – 48: $70,165.45

Month 49 – Expiration of
Initial Term: $72,270.42

 

Months 1 – 12: $106,400.67

Months 13 – 24: $109,592.69

Months 25 – 36: $112,880.47

Months 37 – 48: $116.266.88

Month 49 – Expiration of
Initial Term: $119,754.89

Letter of Credit Required Amount

 

$256,845.32*

 

$425,607.67*

New Required Amount

 

$128,422.66

 

$212,803.83

Tenant’s Allotted Spaces

 

15

 

25

Tenant Improvement
Allowance

 

$74,090, allocable to any Tenant Improvement Allowance Items**

 

$368,310, provided that Tenant Improvement Allowance Items in Work Letter §§ 2.2.1.1 & 2.2.1.8 shall not exceed $122,770**

 


* This reduction shall be effectuated by Tenant replacing the Letter of Credit then being held by Landlord with a new Letter of Credit in the reduced Letter of Credit Required Amount or amending the then-existing Letter of Credit to that new Letter of Credit Required Amount (or, if Tenant originally satisfied its Letter of Credit delivery obligation by the delivery of two Letters of Credit, one for each of the above stated amounts, then the reduction shall be effectuated by Landlord’s return of one such Letter of Credit so that the result is Landlord retaining the Letter of Credit that is in the new Letter of Credit Required Amount).

 

** No Tenant Improvement Allowance shall be disbursed by Landlord with respect to any space not eventually leased by Tenant under this Lease. Any costs related to Tenant Improvements for space not yet delivered to Tenant under this Lease shall be incurred at Tenant’s risk.

 

(e)                                   Tenant shall have the option to renew this Lease with respect to the entire Premises then leased by Tenant upon the expiration of the initial Term for one (1) additional term of five (5) years (the “Extension Term”), by delivering notice to Landlord of Tenant’s option to extend at least nine (9) months but no more than twelve (12) months prior to the end of the initial Term. If Tenant exercises its right to extend, the Term shall be extended for an additional five (5) years, and Tenant shall continue to lease the Premises on all of the terms and conditions of this Lease, except that Basic Monthly Rental for the Extension Term shall increase to the Fair Market Rental Rate (as defined below). In no event shall the Basic Monthly Rental

 

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for the Extension Term be less than the Basic Monthly Rental rate in effect during the last month of the initial Term.

 

(f)                                    For the purposes of the Lease, the term “Fair Market Rental Rate” shall mean the annual amount per rentable square foot that Landlord or other owners of similar property in the vicinity of the Real Property have accepted for comparable space, for a comparable use. Landlord shall determine the Fair Market Rental Rate by using its good faith judgment. Landlord shall provide written notice of such amount within thirty (30) days after Tenant provides the notice to Landlord exercising Tenant’s extension option. Tenant shall have thirty (30) days (“Tenant’s Review Period”) after receipt of Landlord’s notice of the new rental rate within which to accept such rental rate or to reasonably object thereto in writing. In the event Tenant objects, Landlord and Tenant shall attempt to agree upon such Fair Market Rental Rate, using their good faith efforts. If Landlord and Tenant fail to reach agreement within thirty (30) days following Tenant’s Review Period (the “Outside Agreement Date”), then each party shall place in a separate sealed envelope its final proposal as to the Fair Market Rental Rate, and such determination shall be submitted to arbitration in accordance with subsections (i) through (iv) below. Failure of Tenant to so object in writing within Tenant’s Review Period shall conclusively be deemed its approval of the Fair Market Rental Rate determined by Landlord. In the event that Landlord fails to timely generate the initial written notice of Landlord’s opinion of the Fair Market Rental Rate that triggers the negotiation period of this Paragraph 2(f), then Tenant may commence such negotiations by providing the initial notice, in which event Landlord shall have thirty (30) days (“Landlord’s Review Period”) after receipt of Tenant’s notice of the new rental rate within which to accept such rental rate. In the event Landlord fails to accept in writing such rental rate proposed by Tenant, then such proposal shall be deemed rejected, and Landlord and Tenant shall attempt in good faith to agree upon such Fair Market Rental Rate, using their good faith efforts. If Landlord and Tenant fail to reach agreement within thirty (30) days following Landlord’s Review Period (which shall be, in such event, the “Outside Agreement Date” in lieu of the above definition of such date), then each party shall place in a separate sealed envelope its final proposal as to Fair Market Rental Rate and such determination shall be submitted to arbitration in accordance with subsections (i) through (iv) below. If the final determination of the Fair Market Rental Rate has not been made prior to the date on which Tenant’s obligation to pay Basic Monthly Rental during the Extension Term commences, then, from such date until the date the final determination is made (“Interim Period”), Tenant shall pay estimated Basic Monthly Rental for the Premises at the rate applicable to the Premises during the last month of the initial Term. Once the final determination of the Fair Market Rental Rate has been made, if the Basic Monthly Rental payable by Tenant for the Premises pursuant to the Fair Market Rental Rate exceeds the Basic Monthly Rental paid by Tenant during the Interim Period, Tenant shall pay the excess to Landlord concurrently with Tenant’s next installment of Basic Monthly Rental.

 

(i)                                      Landlord and Tenant shall meet with each other within ten (10) business days of the Outside Agreement Date and exchange the sealed envelopes and then open such envelopes in each other’s presence. If Landlord and Tenant do not mutually agree upon the Fair Market Rental Rate within ten (10) business days of the exchange and opening of envelopes, then, within twenty (20) business days of the exchange and opening of envelopes, Landlord and Tenant shall agree upon and jointly appoint a single arbitrator who shall by profession be a real estate lawyer or broker who shall have been active over the five (5) year period ending on the

 

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date of such appointment in the leasing of industrial properties in the vicinity of the Real Property. Neither Landlord nor Tenant shall consult with such broker or lawyer as to his or her opinion as to Fair Market Rental Rate prior to the appointment, nor shall such broker or lawyer have been in the employ of either Landlord or Tenant in the last two (2) years. The determination of the arbitrator shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Fair Market Rental Rate for the Premises is the closest to the actual Fair Market Rental Rate for the Premises as determined by the arbitrator, taking into account the requirements of this Paragraph 2(f). Such arbitrator may hold such hearings and require such briefs as the arbitrator, in his or her sole discretion, determines is necessary. In addition, Landlord or Tenant may submit to the arbitrator (with a copy to the other party) within ten (10) business days after the appointment of the arbitrator any market data and additional information that such party deems relevant to the determination of Fair Market Rental Rate (“FMRR Data”), and the other party may submit a reply in writing within ten (10) business days after receipt of such FMRR Data.

 

(ii)                                   The arbitrator shall, within thirty (30) days of his or her appointment, reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Fair Market Rental Rate and notify Landlord and Tenant of such determination.

 

(iii)                                The decision of the arbitrator shall be binding upon Landlord and Tenant.

 

(iv)                               If Landlord and Tenant fail to agree upon and appoint an arbitrator, then the appointment of the arbitrator shall be made by the Presiding Judge of the San Francisco Superior Court, or, if he or she refuses to act, by any judge having jurisdiction over the parties.

 

(v)                                  The cost of arbitration (not including costs incurred by either party for their own advice and assistance) shall be paid by Landlord and Tenant equally.

 

3.                                       RENTAL; SECURITY DEPOSIT.

 

(a)                                  Beginning on the Suite 420 Commencement Date and continuing through the day prior to the Commencement Date, Tenant agrees to pay to Landlord as Basic Monthly Rental for the Suite 420 Premises the amount of $64,211.33 per month. Beginning on the Commencement Date, Tenant agrees to pay to Landlord as Basic Monthly Rental for the Premises the sums specified in Paragraph I of the Summary of Lease Terms. For purposes of Rent adjustment under this Lease, the number of months is measured from the Commencement Date. Notwithstanding the foregoing, in the event that the Suite 420 Commencement Date does not precede the Commencement Date, then from the Commencement Date until the day immediately prior to the Suite 420 Commencement Date, Basic Monthly Rental for the Suites 310/410 Premises shall be the amount of $106,400.67 per month, and beginning on the Suite 420 Commencement Date Basic Monthly Rental shall be as specified in Paragraph I of the Summary of Lease Terms.

 

(b)                                  Basic Monthly Rental shall be paid to Landlord, in advance, on or before the first day of each and every successive calendar month during the term hereof. In the event the term of this Lease commences on a day other than the first day of a calendar month, or ends

 

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on a day other than the last day of a calendar month, then the Basic Monthly Rental for the first and/or last fractional months of the term shall be appropriately prorated. All such prorations shall be made on the basis of a 360-day year consisting of twelve 30-day months.

 

(c)                                   Rental shall be paid to Landlord without notice, demand, deduction or offset in lawful money of the United States in immediately available funds or by good check as described below at the office of Landlord at Landlord’s address for notices specified in the Summary of Lease Terms, or to such other person or at such other place as Landlord from time to time may designate in writing. Payments made by check must be drawn either on a California financial institution or on a financial institution that is a member of the federal reserve system. All amounts of Rental, if not paid when due, shall bear interest from the due date until paid at an annual rate of interest (the “Interest Rate”) equal to the lesser of (i) the maximum annual interest rate allowed by law on such due date for business loans (not primarily for personal, family or household purposes) not exempt from the usury law, or (ii) a rate equal to the sum of five (5) percentage points over the publicly announced reference rate (the “Reference Rate”) charged on such due date by the San Francisco Main Office of Bank of America, N.A. (or any successor bank thereto) (or if there is no such publicly announced rate, the rate quoted by such bank in pricing ninety (90) day commercial loans to substantial commercial borrowers). In addition, Tenant acknowledges that late payment by Tenant to Landlord of Rental will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance and/or note secured by an encumbrance covering the Premises. Therefore, if any installment of Rental due from Tenant is not received within ten (10) days of the date due, Tenant shall pay to Landlord an additional sum of five percent (5%) of the overdue Rental as a late charge; provided that, if Rental is not paid when due three (3) times during the term of this Lease and if Landlord shall have notified Tenant in writing that Tenant shall thereafter be entitled to no further grace periods, then thereafter Tenant shall not be entitled to such ten (10) day grace period, and such late charge shall be assessed on any Rental not paid by 5:00 p.m. on the date due. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment of Rental by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord.

 

(d)                                  Upon execution of this Lease, Tenant shall pay Landlord the amount of $170,612.00, which amount Landlord shall apply to the first installments of Basic Monthly Rental due under this Lease.

 

(e)                                   The date on which Tenant is required to deliver the initial Letter of Credit to Landlord under Paragraph 26(b) of this Lease (i.e., the date Landlord delivers possession of any portion of the Premises to Tenant) may be postponed under the following terms and conditions. Tenant may delay the required date for delivery of the Letter of Credit by up to thirty (30) days by depositing with Landlord a cash sum in the Letter of Credit Required Amount (the “Cash Security”). Landlord shall hold the Cash Security as security for the performance of Tenant’s obligations under this Lease. If Tenant defaults on any provision of this Lease, Landlord may (but shall not be required to), without prejudice to any other remedy it has, apply all or part of the Cash Security to any Rent or other sum in default, any amount that Landlord may spend or

 

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become obligated to spend in exercising Landlord’s rights under Paragraph 23(e), or any expense, loss, or damage that Landlord may suffer because of Tenant’s default. Tenant waives the provisions of California Civil Code §1950.7, and all other provisions of law now in force or that become in force after the date of execution of this Lease, that provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of accrued Rent, to repair damage caused by Tenant, or to clean the Premises. Landlord and Tenant agree that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other foreseeable or unforeseeable loss or damage caused by the act or omission of Tenant or Tenant’s officers, agents, employees, independent contractors, or invitees, including future rent payments. Tenant may not assign or encumber the Cash Security without the prior, written consent of Landlord. Any attempt to do so shall be void and shall not be binding on Landlord. If Landlord applies any portion of the Cash Security, Tenant shall, within ten (10) days after demand by Landlord, deposit with Landlord an amount sufficient to restore the Cash Security to its original amount. Tenant is not entitled to any interest on the Cash Security. Provided that Tenant performs the requirement of delivering the Letter of Credit to Landlord within thirty (30) days of the date Landlord delivers possession of any portion of the Premises to Tenant, the unused portion of the Cash Security shall be returned to Tenant within five (5) business days following the date on which Tenant delivers the initial Letter of Credit to Landlord, and any sums not timely returned shall bear interest at the Interest Rate until paid.

 

4.                                       TENANT’S SHARE OF OPERATING EXPENSES AND REAL PROPERTY TAXES; ADDITIONAL RENT.

 

(a)                                  In addition to the Basic Monthly Rental payable during the Term of this Lease, commencing on January 1, 2013 and continuing throughout the remaining Term of this Lease (including the Extension Term, if applicable) Tenant shall pay to Landlord, as additional rent, Tenant’s Percentage Share of: (i) the amount, if any, by which Operating Expenses paid or incurred by Landlord in any calendar year subsequent to the Base Year exceed the amount of Operating Expense allocable to the Base Year; and (ii) the amount, if any by which Real Property Taxes paid or incurred by Landlord in any calendar year subsequent to the Base Year exceed the amount of Real Property Taxes allocable to the Tax Base Year. Notwithstanding the foregoing, if the Building is less than one hundred percent (100%) occupied in the Base Year, the Tax Base Year or in any other Expense Year during the Term, then Operating Expenses for the Base Year, Real Property Taxes for the Tax Base Year, and Operating Expenses and Real Property Taxes for such other Expense Year shall be adjusted, for purposes of the foregoing calculations to the amounts that they would have been if the Building had been one hundred percent (100%) occupied. If it shall not be lawful for Tenant to reimburse Landlord for any increase in Real Property Taxes as defined herein, then the Basic Monthly Rental payable to Landlord prior to the imposition of such increases in Real Property Taxes shall be increased to net Landlord the same net Basic Monthly Rental after imposition of such increases in Real Property Taxes as would have been received by Landlord prior to the imposition of such increases in Real Property Taxes.

 

(b)                                  Commencing on January 1, 2013, and continuing throughout the remainder of the Lease Term (including the Extension Term, if applicable), Tenant shall pay to Landlord, as additional rent, one-twelfth (1/12th) of Tenant’s Percentage Share of increases in Operating Expenses over the Base Year and Real Property Taxes over the Tax Base Year for

 

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such Expense Year on or before the first day of each calendar month of such Expense Year, in advance, in an amount estimated by Landlord in notices delivered to Tenant. If Landlord fails to deliver such an estimate to Tenant prior to the commencement of any Expense Year, then Tenant shall continue to pay Tenant’s Percentage Share of increases in Operating Expenses and Real Property Taxes on the basis of the prior Expense Year’s estimate until the first day of the next calendar month after such notice is given, provided that on such date Tenant shall pay to Landlord the amount of such estimated adjustment payable to Landlord for prior months during the Expense Year in question, less any portion thereof previously paid by Tenant. Landlord may revise its estimate of Tenant’s Percentage Share of increases in Operating Expenses and Real Property Taxes for any Expense Year from time to time by giving written notice of such revision to Tenant, in which event subsequent payments by Tenant for such Expense Year shall be based on Landlord’s revised estimate. The failure or delay by Landlord to provide Tenant with Landlord’s estimate of Tenant’s Percentage Share of increases in Operating Expenses and Real Property Taxes or Landlord’s annual statement (as described in subparagraph 4(c) below) for any Expense Year shall not constitute a default by Landlord hereunder, or a waiver by Landlord of Tenant’s obligation to pay Tenant’s Percentage Share of increases in Operating Expenses or Real Property Taxes for such Expense Year or of Landlord’s right to send to Tenant such an estimate or annual statement, as the case may be.

 

(c)                                   Within ninety (90) days after the close of each Expense Year or as soon after such ninety (90) day period as practicable, Landlord shall deliver to Tenant a statement of the amounts payable under Paragraph 4(a) above for such Expense Year (an “Annual Statement”). Within 60 days after receiving any Annual Statement (the “Review Notice Period”), Tenant may give Landlord notice (“Review Notice”) stating that Tenant elects to review Landlord’s calculation of the Operating Expenses and/or Real Property Taxes for the calendar year to which such Annual Statement applies and identifying with reasonable specificity the records of Landlord reasonably relating to such matters that Tenant desires to review. Within a reasonable time after receiving a timely Review Notice, Landlord shall deliver to Tenant, or make available for inspection at a location reasonably designated by Landlord, copies of such records. Within 60 days after such records are made available to Tenant (the “Objection Period”), Tenant may deliver to Landlord notice (an “Objection Notice”) stating with reasonable specificity any objections to the Annual Statement, in which event Landlord and Tenant shall work together in good faith to resolve Tenant’s objections. If Tenant fails to give Landlord a Review Notice before the expiration of the Review Notice Period or fails to give Landlord an Objection Notice before the expiration of the Objection Period, Tenant shall be deemed to have approved the Annual Statement. If Tenant retains an agent to review Landlord’s records, the agent must be with a CPA firm licensed to do business in the State of California and its fees shall not be contingent, in whole or in part, upon the outcome of the review. Tenant shall be responsible for all costs of such review. The records and any related information obtained from Landlord shall be treated as confidential, and as applicable only to the Premises, by Tenant, its auditors, consultants, and any other parties reviewing the same on behalf of Tenant (collectively, “Tenant’s Auditors”). Notwithstanding any contrary provision hereof, Tenant may not examine Landlord’s records or dispute any Annual Statement if any Rent remains unpaid past its due date. If, for any calendar year, Landlord and Tenant determine that the Operating Expenses and/or Real Property Taxes is less or more than the amount reported, Tenant shall receive a credit in the amount of its overpayment against Rent then or next due hereunder, or pay Landlord the amount of its underpayment with the Rent next due hereunder; provided, however, that if this Lease has

 

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expired or terminated and Tenant has vacated the Premises, Landlord shall pay Tenant the amount of its overpayment (less any Rent due), or Tenant shall pay Landlord the amount of its underpayment, within 15 days after such determination.

 

(d)                                  If this Lease expires or terminates on a day other than the last day of an Expense Year, the amounts payable by Tenant under Paragraph 4(a) above with respect to the Expense Year in which such expiration or termination occurs shall be prorated on the basis that the number of days from the commencement of such Expense Year, to and including such expiration or termination date, bears to three hundred sixty (360). The expiration or termination of this Lease shall not affect the obligations of Landlord and Tenant pursuant to Paragraph 4(c) above to be performed after such expiration or termination.

 

(e)                                   It is the intention of Landlord and Tenant that, except as stated to the contrary in this Lease, the Basic Monthly Rental paid to Landlord throughout the term of this Lease shall be absolutely net of all increases in Real Property Taxes over the Tax Base Year and Operating Expenses over the Base Year and the foregoing provisions of this Paragraph 4 are intended to so provide.

 

5.                                       OTHER TAXES PAYABLE BY TENANT. Tenant shall reimburse Landlord upon demand for any and all taxes payable by Landlord (other than net income taxes and Real Property Taxes) whether or not now customary or within the contemplation of the parties hereto:

 

(a)                                  imposed upon, measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures and other personal property located in the Premises or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, regardless of whether title to such improvements shall be in Tenant or Landlord;

 

(b)                                  imposed upon or measured by the Basic Monthly Rental payable hereunder, including, without limitation, any gross income tax or excise tax levied by the City and County of San Francisco, the State of California, the federal government or any other governmental body with respect to the receipt of such rental;

 

(c)                                   imposed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or

 

(d)                                  imposed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

 

In the event that it shall not be lawful for Tenant to so reimburse Landlord, the Basic Monthly Rental payable to Landlord under this Lease shall be revised to net Landlord the same income after imposition of any such tax upon Landlord as would have been received by Landlord hereunder prior to the imposition of any such tax.

 

6.                                       USE. Tenant agrees to use the Premises for general office purpose, and Tenant agrees not to use or permit the use of the Premises or any part thereof for any other purpose. Tenant agrees not to do or permit to be done in or about the Premises or the Building, or to bring or keep or permit to be brought or kept in or about the Premises or the Building, anything that is

 

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prohibited by or will in any way conflict with any law, statute or governmental regulation now or hereafter in effect, or that would subject Landlord or Landlord’s agents to any liability, or that is prohibited by the standard form of fire insurance policy, or that will in any way increase the existing rate of (or otherwise affect) fire or any other insurance on the Building or any of its contents. If any act or omission of Tenant results in any such increase in premium rates, Tenant shall pay to Landlord, as additional rent, upon demand the amount of such increase. Tenant agrees not to do or permit to be done anything in, on or about the Premises or the Building that will in any way obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose. Tenant agrees not to cause, maintain or permit any nuisance in, on or about the Premises or the Building, or to use or permit to be used any loudspeaker or other device, system or apparatus that can be heard outside the Premises without the prior written consent of Landlord or to permit any objectionable odors, bright lights or electrical or radio interference that may annoy or interfere with the rights of other tenants of the Building or the public. Tenant agrees not to commit or suffer to be committed any waste in or upon the Premises. The provisions of this Paragraph 6 are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building.

 

7.                                       COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS.

 

(a)                                  Tenant agrees at its sole cost and expense to promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now or hereafter constituted; with any direction or occupancy certificate issued pursuant to law by any public officer; and with the provisions of all recorded documents affecting the Premises, insofar as any thereof relates to or affects the condition, use or occupancy of the Premises, excluding structural changes not related to or affected by Tenant’s improvements, acts or particular use of the Premises. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant (whether Landlord be a party thereto or not) that Tenant has violated any such law, statute, ordinance or governmental rule, regulation, requirement, direction or provision, shall be conclusive of that fact as between Landlord and Tenant. If Tenant’s use or operation of the Premises or any of Tenant’s equipment therein requires a governmental permit, license or other authorization or any notice to any governmental agency, Tenant shall promptly provide a copy thereof to Landlord. Tenant shall not be obligated to make any improvements to the Premises in order to comply with applicable laws, except to the extent the improvement is required due to a Trigger Event (as defined below). As used herein, the term “Trigger Event” means one or more of the following events or circumstances:

 

(i)                                      Tenant’s particular use of the Premises (other than normal office uses, software and hardware development);

 

(ii)                                   The manner of conduct of Tenant’s business or operation of its installations, equipment or other property outside those of normal office use, software and hardware development;

 

(iii)                                The performance of any improvements of alterations or the installation of any Tenant systems; or

 

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(iv)                               The breach of any of Tenant’s obligations under this Lease.

 

(b)                                  Tenant shall not bring or keep, or permit to be brought or kept, in the Premises or in or on the Real Property any “hazardous substance” (as hereinafter defined). Tenant shall not manufacture, generate, treat, handle, store or dispose of any hazardous substance in the Premises or in or on the Real Property, or use the Premises for any such purpose, or emit, release or discharge any hazardous substance into any air, soil, surface water or groundwater comprising the Premises or the Real Property, or permit any person using or occupying the Premises to do any of the foregoing. Tenant shall comply, and shall cause all persons using or occupying the Premises to comply, with all “environmental laws” (as hereinafter defined) applicable to the Premises, the use or occupancy of the Premises or any operation or activity therein. Tenant shall, within ten (10) days after Tenant’s receipt thereof, give written notice to Landlord of any notice or other communication (oral or written) regarding any (i) actual or alleged violation of environmental laws by Tenant or with respect to the Premises, (ii) actual or threatened release of any hazardous substance from the Premises, or (iii) the existence of any hazardous substance in or on the Premises or regarding any actual or threatened investigation, inquiry, lawsuit, claim, citation, directive, summons, proceeding, complaint, notice, order, writ or injunction relating to any of the foregoing. Tenant shall indemnify and defend Landlord against and hold Landlord harmless from all claims, demands, liabilities, damages, fines, encumbrances, liens, losses, costs and expenses, including reasonable attorneys’ fees and disbursements, and costs and expenses of investigation, arising from or related to the existence on or after the Commencement Date of hazardous substances from the Premises as a result of contamination caused by Tenant or the existence on or after the Commencement Date of a violation of environmental laws by Tenant with respect to the Premises. To the extent Tenant has an indemnification obligation under this Paragraph 7(b), Tenant shall, to the reasonable satisfaction of Landlord, perform all remedial actions necessary to remove any hazardous substances in or on the Premises on or after the Commencement Date or to remedy actual or threatened migration from the Premises of any hazardous substances or to remedy any actual or threatened violation of environmental laws. This Paragraph 7(b) shall survive termination of this Lease. As used in this Lease, “hazardous substance” shall mean any substance or material that is described as a toxic, hazardous, bio-hazardous, corrosive, ignitable, flammable or reactive substance, waste or material or a pollutant or contaminant, or words of similar import, in any of the environmental laws, and includes asbestos, petroleum, petroleum products, polychlorinated biphenyls, radon gas, radioactive matter, and chemicals that may cause cancer or reproductive toxicity. As used in this Lease, “environmental laws” shall mean all federal, state and local laws, ordinances, rules and regulations now or hereafter in force, as amended from time to time, in any way relating to or regulating human health or safety, or industrial hygiene or environmental conditions, or protection of the environment, or pollution or contamination of the air, soil, surface water or groundwater. The provisions of this Paragraph 7(b) shall not prohibit Tenant from the use and storage on the Premises of ordinary office supplies in reasonable quantities and in compliance with all environmental laws.

 

(c)                                   Tenant shall immediately furnish Landlord with any (i) notices received from any insurance company or governmental agency or inspection bureau regarding any unsafe or unlawful conditions within the Premises, and (ii) notices or other communications sent by or on behalf of Tenant to any person relating to environmental laws or hazardous substances.

 

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(d)                                  California law requires landlords to disclose to tenants the existence of certain hazardous substances. Accordingly, the existence of gasoline and other automotive fluids, asbestos containing materials, maintenance fluids, copying fluids and other office supplies and equipment, certain construction and finish materials, tobacco smoke, cosmetics and other personal items must be disclosed. Gasoline and other automotive fluids are found in the Parking Lot. Cleaning, lubricating and hydraulic fluids used in the operation and maintenance of the Building are found in the utility areas of the Building not generally accessible to Building occupants or the public. Many Building occupants use copy machines and printers with associated fluids and toners, and pens, markers, inks, and office equipment that may contain hazardous substances. Certain adhesives, paints and other construction materials and finishes used in portions of the Building may contain hazardous substances. Although smoking is prohibited in the public areas of the Building, these areas may from time to time be exposed to tobacco smoke. Building occupants and other persons entering the Building from time to time may use or carry prescription and non-prescription drugs, perfumes, cosmetics and other toiletries, and foods and beverages, some of which may contain hazardous substances.

 

(e)                                   As an inducement to Landlord to enter into this Lease, Tenant hereby represents and warrants that: (i) Tenant is not, nor is it owned or controlled directly or indirectly by, any person, group, entity or nation named on any list issued by the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) pursuant to Executive Order 13224 or any similar list or any law, order, rule or regulation or any Executive Order of the President of the United States as a terrorist, “Specially Designated National and Blocked Person” or other banned or blocked person (any such person, group, entity or nation being hereinafter referred to as a “Prohibited Person”); (ii) Tenant is not (nor is it owned or controlled, directly or indirectly, by any person, group, entity or nation which is) acting directly or indirectly for or on behalf of any Prohibited Person; and (iii) neither Tenant (nor any person, group, entity or nation which owns or controls Tenant, directly or indirectly) has conducted or will conduct business or has engaged or will engage in any transaction or dealing with any Prohibited Person, including without limitation any assignment of this Lease or any subletting of all or any portion of the Premises or the making or receiving of any contribution of funds, goods or services to or for the benefit of a Prohibited Person. Tenant covenants and agrees (a) to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect, (b) to immediately notify Landlord in writing if any of the representations, warranties or covenants set forth in this Section 8(e) are no longer true or have been breached or if Tenant has a reasonable basis to believe that they may no longer be true or have been breached, (c) not to use funds from any Prohibited Person to make any payment due to Landlord under the Lease and (d) at the request of Landlord, to provide such information as may be requested by Landlord to determine Tenant’s compliance with the terms hereof. Any breach by Tenant of the foregoing representations and warranties shall be deemed an Event of Default by Tenant under this Lease and shall be covered by the indemnity provisions of Section 13 above. The representations and warranties contained in this subsection shall be continuing in nature and shall survive the expiration or earlier termination of this Lease.

 

(f)                                    The provisions of this Paragraph 7 are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building.

 

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8.                                       ALTERATIONS; LIENS.

 

(a)                                  Tenant agrees not to make or suffer to be made any alteration, addition or improvement to or of the Premises (hereinafter referred to as “Alterations”), or any part thereof, without the prior written consent of Landlord. Any such Alterations made by Tenant, including without limitation any partitions (movable or otherwise) or carpeting, shall become a part of the Building and belong to Landlord; provided, however, that equipment, trade fixtures and movable furniture shall remain the property of Tenant. If Landlord consents to the making of any Alterations, the same shall be designed and constructed or installed by Tenant at its expense (including expenses incurred in complying with applicable laws, including laws relating to the handling and disposal of asbestos-containing materials). Tenant shall use a general contractor, subcontractors, engineers and architects that are on Landlord’s approved list of design and construction professionals. All Alterations shall be made in accordance with plans and specifications approved in writing by Landlord and shall be designed and constructed in compliance with all applicable codes, laws, ordinances, rules and regulations. The design and construction of any Alterations shall be performed in accordance with Landlord’s applicable rules, regulations and requirements. Under no circumstances shall Landlord be liable to Tenant for any damage, loss, cost or expense incurred by Tenant on account of Tenant’s plans and specifications, Tenant’s contractors or subcontractors, design of any work, construction of any work, or delay in completion of any work; provided that this sentence shall not be construed to permit Landlord to extend any time periods under the terms of the Work Letter except where the delay is beyond Landlord’s reasonable control. Tenant shall pay to Landlord a fee in the amount of five percent (5%) of the cost of the Alterations for Landlord’s review of plans and its management and supervision of the progress of the work; provided that this requirement shall not apply to the Tenant Improvements made under the Tenant Work Letter, it being agreed that for such Alterations the Coordination Fee (as defined therein) shall supersede this requirement. All sums due to such contractors, if paid by Landlord due to Tenant’s failure to pay such sums when due, shall bear interest payable to Landlord at the Interest Rate until fully paid. Upon the expiration or sooner termination of this Lease, Tenant, at its expense, shall promptly remove any such Alterations made by Tenant and designated by Landlord so to be removed and repair any damage to the Premises caused by such removal. Tenant shall use the general contractor designated by Landlord for such removal and repair. Upon submission of any plans for Landlord’s approval, Tenant may request prior to the installation of specific fixtures, equipment or improvements in the Premises, that Landlord agree not to require Tenant to remove such items upon expiration or termination of the Lease or agree to permit Tenant to remove any item it may otherwise not be permitted to remove under the terms of this Lease. Such consent, which may be granted or denied in Landlord’s sole discretion, must be granted in writing prior to the installation of the subject items in order to be binding against Landlord.

 

(b)                                  Tenant agrees to keep the Premises and the Real Property free from any liens arising out of any work performed, materials furnished or obligations incurred by Tenant. Tenant shall promptly and fully pay and discharge all claims on which any such lien could be based. In the event that Tenant does not, within ten (10) business days following Tenant’s learning of any such lien, cause the same to be released of record, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expenses

 

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incurred by it in connection therewith, shall be payable to Landlord by Tenant, as additional rent, on demand, together with interest at the Interest Rate from the date such expenses are incurred by Landlord to the date of the payment thereof by Tenant to Landlord. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper for the protection of Landlord, the Premises, the Building, or the Real Property, from mechanic’s and materialmen’s and like liens. Tenant shall give Landlord at least ten (10) days’ prior written notice of the date of commencement of any construction on the Premises in order to permit the posting of such notices.

 

9.                                       MAINTENANCE AND REPAIR.

 

(a)                                  Landlord shall deliver the Premises to Tenant in good and sanitary order, condition and repair. Thereafter, subject to any pre-existing defects discovered by Tenant, Tenant, at its expense, shall at all times keep the Premises and every part thereof and all equipment, fixtures and improvements therein in good and sanitary order, condition and repair, damage thereto by fire, the perils of the extended coverage endorsement excepted, and Tenant waives all rights under, and benefits of, subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law or ordinance now or hereafter in effect. Upon the expiration or sooner termination of this Lease, Tenant shall surrender the Premises and (unless designated by Landlord to be removed in accordance with Paragraph 8 above) all Alterations thereto to Landlord in the same condition as when received, ordinary wear and tear (except such as Tenant is obligated to repair to keep the Premises in good condition and repair) and damage thereto by fire, the perils of the extended coverage endorsement excepted. It is agreed that Landlord has no obligation, and has made no promises, to alter, add to, remodel, improve, repair, decorate or paint the Premises or any part thereof and that no representations respecting the condition of the Premises, the Building or the Real Property have been made by Landlord to Tenant except as may be specifically set forth herein. No representation or warranty, express or implied, is made with respect to (i) the condition of the Premises or the Building, (ii) the present or future suitability or fitness of the Premises for Tenant’s intended or permitted use, (iii) the degree of sound transfer within the Building, (iv) the absence of electrical or radio interference in the Premises or the Building, (v) the condition, capacity or performance of electrical or communications systems or facilities, or (vi) the absence of objectionable odors, bright lights or other conditions that may affect Tenant’s use and enjoyment of the Premises or the Building.

 

(b)                                  Landlord agrees to make all necessary repairs to the structure, the exterior, and the public and common areas of the Building and all Building systems, and to maintain the same in reasonably good order and condition. Any damage arising from the acts of Tenant, its agents, employees, contractors or invitees shall be repaired by Landlord at Tenant’s sole expense. Tenant shall pay Landlord on demand the cost of any such repair.

 

10.                                SERVICES.

 

(a)                                  Provided that Tenant is not in default in the performance or observance of any of the terms, covenants or conditions of this Lease to be performed or observed by Tenant and the Lease has not terminated, Landlord, subject to the terms of this Paragraph 10 and the Building Rules and Regulations attached hereto as Exhibit B and subject to applicable laws,

 

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regulations and rules of public utilities, shall furnish to the Premises water, electrical power and elevator service suitable for the use of the Premises for ordinary office purposes; heating and air conditioning suitable for the comfortable use and occupation of the Premises (assuming normal office use thereof and subject to any restrictions on use as may be prescribed by any applicable policies or regulations of any utility or governmental agency) during normal business hours (specifically, 7:00 a.m. to 7:00 p.m.), excluding weekends and holidays. Tenant agrees to pay, as additional rent, promptly on demand any and all costs incurred by Landlord (as reasonably determined by Landlord) in connection with providing any additional or excessive (i.e., amounts in excess of normal office use during normal business hours) utilities or services Landlord may provide. Unless otherwise specifically provided in this Lease, all means of distribution of all utilities within the Premises shall be supplied by Tenant at its expense, and Tenant shall bear the cost of water, gas, electricity, sewerage and other utilities serving the Premises. Landlord reserves the right to install, at Tenant’s expense, a separate meter in the Premises for electricity. Tenant agrees that at all times it will cooperate fully with Landlord and abide by all regulations and requirements that Landlord may prescribe for the proper functioning and protection of the Building heating, ventilating and air conditioning systems. Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of Rental by reason of Landlord’s failure to furnish any of the foregoing or any other utilities or services when such failure is caused by accident, breakage, repairs, strikes, lockouts or other labor disturbances or disputes of any character, by the limitation, curtailment, rationing or restrictions on use of electricity, gas or any form of energy, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord. No such failure and no interruption of utilities or services from any cause whatsoever shall constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant. Tenant hereby waives the provisions of California Civil Code Section 1932(1) or any other applicable existing or future law, ordinance or governmental regulation permitting the termination of this Lease due to such failure or interruption. Landlord shall not be liable under any circumstances for injury to or death of any person or damage to or destruction of property, however occurring, through or in connection with or incidental to the furnishing of or the failure to furnish any of the foregoing utilities or services or any other utilities or services. Tenant shall at Tenant’s sole cost and expense provide janitorial service to the Premises using the same janitorial contractor that provides janitorial service to the balance of the Building.

 

(b)                                  Landlord makes no representation to Tenant regarding the adequacy or fitness of the heating, air conditioning or ventilation equipment in the Building to maintain temperatures that may be required for, or because of, any of Tenant’s equipment that uses other than the fractional horsepower normally required for office equipment, and Landlord shall have no liability for loss or damage suffered by Tenant or others in connection therewith. If Tenant’s use of the heating, air conditioning or ventilation system exceeds normal office use and thereby causes damages to any of the air conditioning units or other equipment, the cost to repair or replace any such units or equipment due to such use shall be paid by Tenant to Landlord, as additional rent, upon demand by Landlord. If the temperature otherwise maintained in any portion of the Premises by the heating, air conditioning or ventilation system is affected as a result of (i) any lights, machines or equipment (including without limitation electronic data processing machines) used by Tenant in the Premises, (ii) the occupancy of the Premises by more than one person per two hundred (200) square feet of rentable area therein, (iii) an

 

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electrical load for lighting or power in excess of the limits per square foot of rentable area of the Premises specified in Paragraph 10(c) below, or (iv) any rearrangement of partitioning or other improvements, Landlord shall have the right to install supplementary air conditioning units or other equipment Landlord deems appropriate in the Premises, and the cost thereof, including the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord, as additional rent, upon demand by Landlord.

 

(c)                                   Tenant agrees it will not, without the written consent of Landlord, use any equipment, apparatus or device in the Premises (including, without limitation, electronic data processing machines, computers or machines using current in excess of 110 volts) that will, individually or in the aggregate, in any way cause the amount of electricity, water or heating, ventilation or air conditioning supplied to the Premises to exceed the amount usually furnished or supplied to premises being used as general office space, or connect with electric current (except through existing electrical outlets in the Premises) or with water pipes any equipment, apparatus or device for the purposes of using electric current or water. Landlord shall not, in any way, be liable or responsible to Tenant for any loss or damage or expense that Tenant may incur or sustain if, for any reasons beyond Landlord’s reasonable control, either the quantity or character of electric service is changed or is no longer available or suitable for Tenant’s requirements. Tenant covenants that at all times its use of electric current shall never exceed the capacity of the feeders, risers or electrical installations of the Building. If submetering of electricity in the Building will not be permitted under future laws or regulations, the Basic Monthly Rental will then be equitably adjusted to include an additional payment to Landlord reflecting the cost to Landlord for furnishing electricity to the Premises.

 

(d)                                  Tenant shall give reasonable notice in making any request for utilities required outside of normal business hours. Tenant agrees to pay, as additional rent, promptly on demand any and all costs incurred by Landlord in connection with providing any additional utilities and services Landlord may provide.

 

(e)                                   In the event any governmental authority having jurisdiction over the Real Property or the Building promulgates or revises any law, ordinance or regulation or building, fire or other code or imposes mandatory or voluntary controls or guidelines on Landlord or the Real Property or the Building relating to the use or conservation of energy or utilities or the reduction of automobile or other emissions (collectively “Controls”) or in the event Landlord is required or elects to make alterations to the Real Property or the Building in order to comply with such mandatory or voluntary Controls, Landlord may, in its sole discretion, comply with such Controls or make such alterations to the Real Property or the Building related thereto. Such compliance and the making of such alterations shall not constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant.

 

11.                                SECURITY; ACCESS; CONTROL.

 

(a)                                  Landlord shall have the right from time to time to adopt such policies, procedures and programs as it shall, in Landlord’s sole discretion, deem necessary or appropriate for the security of the Building, and Tenant shall cooperate with Landlord in the enforcement of, and shall comply with, the policies, procedures and programs adopted by Landlord insofar as the

 

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same pertain to Tenant, its agents, employees, contractors and invitees. Tenant acknowledges that the safety and security devices, services and programs provided by Landlord from time to time, if any, may not prevent theft or other criminal acts, or insure the safety of persons or property, and Tenant expressly assumes the risk that any safety device, service or program may not be effective or may malfunction or be circumvented. In all events and notwithstanding any provision of this Lease to the contrary, Landlord and the other Indemnitees (defined below) shall not be liable to Tenant, and Tenant hereby waives any claim against the Indemnitees to the maximum extent permitted by law, for (i) any unauthorized or criminal entry of third parties into the Premises or the Building, (ii) any injury to or death of persons from any unauthorized or criminal acts of third parties, or (iii) any loss of property in and about the Premises or the Building by or from any unauthorized or criminal acts of third parties, regardless of any action, inaction, failure, breakdown, malfunction and/or insufficiency of the security services provided by Landlord, or any allegation of active or passive negligence on the part of Landlord or the other Indemnitees. Tenant shall obtain insurance coverage to the extent Tenant desires protection against criminal acts and other losses.

 

(b)                                  In no event shall Landlord be liable for damages resulting from any error with regard to the admission to or the exclusion from the Building of any person. In the case of invasion, mob, riot, public demonstration or other circumstances rendering such action advisable in Landlord’s opinion, Landlord reserves the right to prevent access to the Building during the continuance of the same by such action as Landlord may deem appropriate, including closing doors.

 

(c)                                   In the event of any picketing, public demonstration or other threat to the security of the Building that is attributable in whole or in part to Tenant, Tenant shall reimburse Landlord for any costs incurred by Landlord in connection with such picketing, demonstration or other threat in order to protect the security of the Building, and Tenant shall indemnify and hold Landlord harmless from and protect and defend Landlord against any and all claims, demands, suits, liability, damage or loss and against all costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, arising out of or relating to any such picketing, demonstration or other threat. Tenant agrees not to employ any person, entity or contractor for any work in the Premises (including moving Tenant’s equipment and furnishings in, out or around the Premises) whose presence may give rise to a labor or other disturbance in the Building and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for the work. The obligations imposed on Tenant in this Paragraph 11(c) shall not apply to the extent caused by Tenant’s employ of a person, entity or contractor whose selection is based on a pre-approved Landlord list.

 

(d)                                  Subject to (i) all of the terms and conditions of this Lease, including the Rules and Regulations attached hereto as Exhibit B , (ii) emergency situations or other matters outside the reasonable control of Landlord, and (iii) the requirements of applicable laws, Tenant shall have access to and use of the Building twenty-four (24) hours per day, seven (7) days per week, three hundred sixty-five (365) days per year throughout the Term.

 

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12.                                ASSIGNMENT AND SUBLETTING.

 

(a)                                  Tenant shall not, either voluntarily or by operation of law, (i) assign or transfer this Lease or any interest herein, (ii) sublet the Premises, or any part thereof, or (iii) enter into a license agreement or other arrangement whereby the Premises, or any portion thereof, are held or utilized by another party (each of the foregoing defined herein as a “Transfer”), without the express prior written consent of Landlord, which consent Landlord shall not unreasonably withhold, condition or delay. Any such act (whether voluntary or involuntary, by operation of law or otherwise) without the consent of Landlord pursuant to the provisions of this Paragraph 12 shall, at Landlord’s option, be void and/or constitute an Event of Default under this Lease. Consent to any Transfer shall neither relieve Tenant of the necessity of obtaining Landlord’s consent to any future Transfer nor relieve Tenant from any liability under this Lease.

 

By way of example and without limitation, the failure to satisfy any of the following conditions or standards shall be deemed to constitute reasonable grounds for Landlord to refuse to grant its consent to the proposed Transfer:

 

(1)                                  The proposed Transferee must expressly assume all of the provisions, covenants and conditions of this Lease on the part of Tenant to be kept and performed.

 

(2)                                  The proposed Transferee must satisfy Landlord’s then-current credit and other standards for tenants of the Building and, in Landlord’s reasonable opinion, have the financial strength and stability to perform all of the obligations of the Tenant under this Lease (as they apply to the transferred space) as and when they fall due.

 

(3)                                  The proposed Transferee must be reasonably satisfactory to Landlord as to character and professional standing.

 

(4)                                  The proposed use of the Premises by the proposed Transferee must be, in Landlord’s opinion: (A) lawful; (B) in compliance with Paragraph 6 of this Lease; (C) appropriate to the location and configuration of the Premises; (D) unlikely to cause an increase in insurance premiums for insurance policies applicable to the Building; (E) a use not requiring any new tenant improvements that Landlord would be entitled to disapprove pursuant to Paragraph 8 hereof; (F) unlikely to cause any material increase in services to be provided to the Premises; (G) unlikely to create any materially increased burden in the operation of the Building, or in the operation of any of its facilities or equipment; and (H) unlikely to impair the dignity, reputation or character of the Building.

 

(5)                                  The proposed use of the Premises must not result in the division of the Premises into more than two (2) parcels or tenant spaces.

 

(6)                                  At the time of the proposed Transfer, an Event of Default (as defined in Paragraph 18(a) below) shall not have occurred and be continuing, and no event may have occurred that with notice, the passage of time, or both, would become an Event of Default.

 

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(7)                                  The proposed Transferee shall not be a governmental entity or hold any exemption from the payment of ad valorem or other taxes that would prohibit Landlord from collecting from such Transferee any amounts otherwise payable under this Lease.

 

(8)                                  The proposed Transferee shall not be a then present tenant or affiliate or subsidiary of a then present tenant in the Building unless there is no other suitable space available in the Building.

 

(9)                                  Landlord shall not be negotiating with, and shall not have at any time within the past thirty (30) days negotiated with, the proposed Transferee for space in the Building.

 

(b)                                  Except in the event of (i) a Transfer pursuant to Paragraphs 12(e) or 12(f) below, or (ii) subleases that both (A) cover in the aggregate not more than 15,000 rentable square feet of space in the Premises and (B) have terms that (1) commence no later than the date that is twenty-four (24) months after the Commencement Date and (2) expire no later than the date that is twenty four (24) months after the commencement of the first sublease of space in any portion of the Premises, Landlord shall have no obligation to consent or consider granting its consent to any proposed Transfer unless Tenant has first delivered to Landlord a written offer to enter into such Transfer with Landlord, which offer shall include the base rent and other economic terms of the proposed Transfer, the date upon which Tenant desires to effect such Transfer and all of the other material terms of the proposed Transfer (“Tenant’s Offer”). Landlord shall have twenty (20) days from receipt of Tenant’s Offer within which to notify Tenant in writing of Landlord’s decision to accept or reject such Transfer on the terms set forth in Tenant’s Offer. If Landlord does not accept Tenant’s Offer within such period, Tenant shall deliver to Landlord a second notice of such offer. If Landlord does not accept Tenant’s offer within five (5) days after receipt of such second notice, Tenant may enter into such Transfer with any bona fide independent third-party Transferee (as defined in Paragraph 12(c) below) within ninety(90) days of the end of such twenty(20) day period, so long as such Transfer is for the same base rent offered to Landlord in Tenant’s Offer and such Transfer otherwise contains terms not more than five percent (5%) more favorable economically to the Transferee than the terms stated in Tenant’s Offer, taking into account all rent concessions, tenant improvements, and any other terms that have an economic impact on the Transfer; provided, however, that the prior written approval of Landlord for such Transfer must be obtained, and the other provisions of this Paragraph 12 must be complied with, all in accordance with this Paragraph 12. If Landlord accepts Tenant’s Offer, Landlord and Tenant shall enter into an agreement for such Transfer within thirty (30) days of the date Landlord makes its election. If Landlord accepts Tenant’s Offer, then (i) Landlord may enter into a new lease, sublease or other agreement covering the Premises or any portion thereof with the intended Transferee on such terms as Landlord and such Transferee may agree, or enter into a new lease or agreement covering the Premises or any portion thereof with any other person or entity, and in any such event, Tenant shall not be entitled to any portion of the profit, if any, that Landlord may realize on account of such new lease or agreement, (ii) Landlord may, at Landlord’s sole cost, construct improvements in the subject space and, so long as the improvements are suitable for general office purposes, Landlord shall have no obligation to restore the subject space to its original condition following the termination of a sublease, and (iii) Landlord shall not have any liability for any real estate brokerage commission(s) or with respect to any of the costs and expenses that Tenant may have incurred in connection with its

 

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proposed Transfer, and Tenant agrees to indemnify, defend and hold harmless Landlord from and against any and all claims (including, without limitation, claims for commissions) arising from such proposed Transfer.

 

Except in the event of a proposed Transfer pursuant to Paragraphs 12(e) or 12(f) below, in the case of a proposed assignment of this Lease or a sublease of substantially the entire Premises for substantially the balance of the term of this Lease, then in addition to the foregoing rights of Landlord, Landlord shall have the right, by notice to Tenant within fifteen (15) days after receipt of Tenant’s Offer, to terminate this Lease, which termination shall be effective as of the date on which the intended assignment or sublease would have been effective if Landlord had not exercised such termination right. If Landlord elects to terminate this Lease, then from and after the date of such termination, Landlord and Tenant each shall have no further obligation to the other under this Lease with respect to the Premises except for matters occurring or obligations arising hereunder prior to the date of such termination.

 

Landlord’s foregoing rights and options shall continue throughout the entire term of this Lease.

 

(c)                                                 Tenant shall, in each instance of a proposed Transfer, give written notice to Landlord at least thirty (30) days prior to the effective date of any proposed Transfer, specifying in such notice (i) the nature of the proposed Transfer, (ii) the portion of the Premises to be transferred, (iii) the intended use of the transferred Premises, (iv) all economic terms of the proposed Transfer, (v) the effective date thereof, (vi) the identity of the transferee under the proposed Transfer (the “Transferee”), (vii) current financial statements of the Transferee, and (viii) detailed documentation relating to the business experience of the Transferee (collectively, “Tenant’s Notice”). Tenant also shall promptly furnish Landlord with any other information reasonably requested by Landlord relating to the proposed Transfer or the proposed Transferee. Within fifteen (15) days after receipt by Landlord of Tenant’s Notice and any additional information and data requested by Landlord, Landlord shall notify Tenant of Landlord’s determination to either (i) consent to the proposed Transfer, or (ii) refuse to consent to such proposed Transfer.

 

(d)                                                Fifty percent (50%) of all of the following (“Excess Rental”) shall be paid by Tenant to Landlord immediately upon receipt thereof by Tenant: (i) consideration paid or payable by Transferee to Tenant as consideration for any such Transfer; and (ii) rents received in connection with the Transfer by Tenant from Transferee in excess of the Rental payable by Tenant to Landlord under this Lease, less reasonable, documented, out-of-pocket costs paid by Tenant to third parties for brokerage commissions, tenant improvement costs and legal fees in connection with the subject Transfer (amortized equally over the term of the Sublease (in the case of a Sublease) or the remaining term of the Lease (in the case of an assignment)). If there is more than one sublease under this Lease, the amounts (if any) to be paid by Tenant to Landlord pursuant to the preceding sentence shall be separately calculated for each sublease and amounts due Landlord with regard to any one sublease may not be offset against rental and other consideration pertaining to or due under any other sublease. Upon Landlord’s request, Tenant shall assign to Landlord all amounts to be paid to Tenant by any Transferee and shall direct such Transferee to pay the same directly to Landlord, in which case Landlord shall pay to Tenant fifty percent (50%) of such Excess Rental promptly upon Landlord’s receipt thereof.

 

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If this Lease is assigned, whether or not in violation of the terms of this Lease, Landlord may collect rent from the assignee. If the Premises or any part thereof is sublet, Landlord may, upon an Event of Default by Tenant hereunder, collect rent from the subtenant. In either event, Landlord may apply the amount collected from the assignee or subtenant to Tenant’s monetary obligations hereunder. Neither Landlord’s collection of rent from a Transferee nor any course of dealing between Landlord and any Transferee shall constitute or be deemed to constitute Landlord’s consent to any Transfer.

 

(e)                                                 Notwithstanding anything to the contrary contained in this Article 18, Tenant may assign this Lease or sublet the Premises without the need for Landlord’s consent if such assignment or sublease is to any parent, subsidiary or affiliate business entity which the initially named Tenant controls, is controlled by or is under common control with (each, an “Affiliate”) provided that: (i) at least thirty (30) days prior to such assignment or sublease, Tenant delivers to Landlord the financial statements or other financial and background information of the assignee or sublessee as required for other transfers; (ii) if the transfer is an assignment, the assignee assumes, in full, the obligations of Tenant under this Lease (or if a sublease, the sublessee of a portion of the Premises or term assumes, in full, the obligations of Tenant with respect to such portion); (iii) the financial audited net worth of the assignee or sublessee for the most recently ended fiscal year as of the time of the proposed transfer is equal to or greater than the financial audited net worth of the originally named Tenant for the most recently ended fiscal year upon the date of this Lease and is sufficient for such assignee or sublessee to fulfill its obligations pursuant to such assignment or sublease; (iv) Tenant remains fully liable under this Lease; and (v) unless Landlord consents to the same, the use of the Premises set forth herein remains unchanged. As used in this section, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies through ownership of more than fifty percent (50%) of the securities or partnership or other ownership interests of the entity subject to control.

 

(f)                                                  Notwithstanding anything to the contrary contained in this Article 18, Tenant may engage in Approved Reorganizations (as defined below), without the need for the consent of Landlord; provided that (a) at least ten (10) days prior to the effective date of the Approved Reorganization, Tenant shall furnish Landlord with the name of the transferee and a written certification from an officer of Tenant certifying that the assignment or sublease qualifies as an Approved Reorganization, (b) no Event of Default exists under this Lease during the period commencing on the date of Tenant’s request and ending on the effective date of the Approved Reorganization, and (c) there is no change in use of the Premises. To the extent that legal requirements or confidentiality requirements do not permit Tenant to give Landlord prior notice of an Approved Reorganization, then Tenant may in lieu of the prior notice required under this Section give Landlord notice within ten (10) days after the effective date of the Approved Reorganization, together with the name of the transferee and a written certification from an officer of Tenant certifying that the assignment or sublease qualifies as an Approved Reorganization. As used herein, the term “Approved Reorganizations” means any statutory share exchange, merger, reorganization or consolidation involving Tenant or its stockholders, (whether or not Tenant is the surviving entity), or the sale of all or substantially all of the assets or stock of Tenant, in each case as a going concern, where (1) Tenant’s successor (together with Tenant, so long as Tenant remains liable under this Lease) shall have a net worth following

 

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consummation of such transaction, as reasonably determined by Landlord in accordance with generally accepted accounting principles, that is at least equal to the net worth, on the date of this Lease, of the original named Tenant, and (2) Tenant’s successor shall have a net worth following consummation of such transaction, as reasonably determined by Landlord in accordance with generally accepted accounting principles, that is sufficient to meet the remaining obligations of Tenant under this Lease.

 

(g)                                                 Notwithstanding anything to the contrary contained in this Article 18,, a sale, transfer or assignment of a general partner’s interest or any portion thereof in Tenant, if Tenant is a partnership, or a sale, transfer or assignment of fifty percent (50%) or less in the aggregate of the voting stock of Tenant if Tenant is a corporation, or a sale, transfer or assignment of fifty percent (50%) or less in the aggregate of the membership interests of Tenant if Tenant is a limited liability company, whether such sale, transfer or assignment occurs in a single transaction or a series of transactions (provided that all transactions shall be aggregated for purposes of determining whether the fifty percent (50%) thresholds described above have been exceeded), shall not be deemed a Transfer and shall not require Landlord’s consent in accordance with the procedures specified in Paragraph 12(a) above.

 

(h)                                                In addition, notwithstanding anything to the contrary contained in this Article 18, Landlord’s consent shall not be required with respect to any and all infusions of additional equity capital in Tenant or an initial public offering of equity securities of Tenant under the Securities Act of 1933, as amended, which results in Tenant’s stock being traded on a national securities exchange, including, but not limited to, the NYSE, the NASDAQ Stock Market or the NASDAQ Small Cap Market System.

 

(i)                                                    Tenant agrees that any instrument by which Tenant assigns this Lease or any interest therein or sublets or otherwise Transfers all or any portion of the Premises shall expressly provide that the Transferee may not further assign this Lease or any interest therein or sublet the sublet space without Landlord’s prior written consent (which consent shall be subject to the provisions of this Paragraph 12), and that the Transferee shall comply with all of the provisions of this Lease pertaining to the sublet space and that Landlord may enforce such Lease provisions directly against such Transferee. No permitted subletting by Tenant shall be effective until there has been delivered to Landlord a counterpart of the sublease in which the subtenant agrees to be and remain jointly and severally liable with Tenant for the payment of rent pertaining to the sublet space and for the performance of all of the terms and provisions of this Lease pertaining to the sublet space; provided, however, that the subtenant shall be liable to Landlord for rent only in the amount set forth in the sublease. No permitted assignment shall be effective unless and until there has been delivered to Landlord a counterpart of the assignment in which the assignee assumes all of Tenant’s obligations under this Lease arising on or after the date of the assignment. The failure or refusal of a subtenant or assignee to execute any such instrument shall not release or discharge the subtenant or assignee from its liability as set forth above.

 

(j)                                                   If Landlord consents to a Transfer hereunder and this Lease contains any renewal options, expansion options, rights of first refusal, rights of first negotiation or any other rights or options pertaining to additional space in the Building, such rights and/or options shall

 

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not run to the Transferee, it being agreed by the parties hereto that any such rights and options are personal to the original Tenant named herein and may not be transferred.

 

(k)                                                Notwithstanding any provision of this Lease to the contrary, Tenant shall not mortgage, encumber or hypothecate this Lease or any interest herein without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole and absolute discretion. Any such act without the prior written consent of Landlord (whether voluntary or involuntary, by operation of law or otherwise) shall, at Landlord’s option, be void and/or constitute an Event of Default under this Lease.

 

(l)                                                    The voluntary or other surrender of this Lease or of the Premises by Tenant or a mutual cancellation of this Lease shall not work a merger, and at the option of Landlord any existing subleases may be terminated or be deemed assigned to Landlord in which latter event the subleases or subtenants shall become tenants of Landlord.

 

(m)                                            Tenant shall pay to Landlord the amount of Landlord’s cost of processing each proposed Transfer (including, without limitation, attorneys’ and other professional fees, and the cost of Landlord’s administrative, accounting and clerical time; collectively “Processing Costs”), and the amount of all direct and indirect expenses incurred by Landlord arising from the assignee or sublessee taking occupancy of the subject space (including, without limitation, costs of freight elevator operation for moving of furnishings and trade fixtures, security service, janitorial and cleaning service, and rubbish removal service). Notwithstanding anything to the contrary herein, Landlord shall not be required to process any request for Landlord’s consent to a Transfer until Tenant has paid to Landlord the amount of Landlord’s estimate of the Processing Costs and all other direct and indirect costs and expenses of Landlord and its agents arising from the assignee’s or subtenant’s taking occupancy.

 

13.                                WAIVER; INDEMNIFICATION. Neither Landlord nor Landlord’s agents, nor any member, shareholder, constituent partner or other owner of Landlord or any agent of Landlord, nor any contractor, officer, director or employee of any thereof, shall be liable to Tenant, and Tenant waives all claims against Landlord and such other persons for any injury to or death of any person or for loss of use of or damage to or destruction of property in or about the Premises or the Building by or from any cause whatsoever, including without limitation, earthquake or earth movement, gas, fire, oil, electricity or leakage from the roof, walls, basement or other portion of the Premises or the Building, unless caused solely by the gross negligence or willful misconduct of Landlord, its agents or employees. Tenant agrees to indemnify and hold Landlord, Landlord’s agents, the members, shareholders, constituent partners and/or other owners of Landlord or any agent of Landlord, and all contractors, officers, directors and employees of any thereof (collectively, “Indemnitees”), and each of them, harmless from and to protect and defend each Indemnitee against any and all claims, demands, suits, liability, damage or loss and against all costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, (a) arising out of any injury or death of any person or damage to or destruction of property occurring in, on or about the Premises, from any cause whatsoever, unless caused solely by the gross negligence or willful misconduct of an Indemnitee, or (b) occurring in, on or about any facilities (including without limitation elevators, stairways, passageways or hallways) the use of which Tenant has in common with other tenants, or elsewhere in or about the Real Property or in the vicinity of the Real Property, when such claim,

 

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injury or damage is caused in whole or in part by the act, neglect, default, or omission of any duty by Tenant, its agents, contractors, employees, invitees, or subtenants, or otherwise by any conduct of any of said persons in or about the Premises or the Real Property, or (c) arising from any failure of Tenant to observe or perform any of its obligations hereunder. If any action or proceeding is brought against any of the Indemnitees by reason of any such claim or liability, Tenant, upon notice from Landlord, covenants to resist and defend at Tenant’s sole expense such action or proceeding by counsel reasonably satisfactory to Landlord. The provisions of this Paragraph shall survive the termination of this Lease with respect to any claims or liability occurring prior to such termination.

 

14.                                INSURANCE.

 

(a)                                  At Tenant’s expense, Tenant shall procure, carry and maintain in effect throughout the term of this Lease, in a form and with deductibles acceptable to Landlord and with such insurance companies as are acceptable to Landlord (which companies shall have a Best’s rating of A-X or better), the following insurance coverages:

 

(i)                                      commercial general liability insurance, including Broad Form Property Damage and Contractual Liability with the following minimum limits: General Aggregate $3,000,000.00; Products/Completed Operations Aggregate $2,000,000.00; Each Occurrence $2,000,000.00; Personal and Advertising Injury $1,000,000.00; Medical Payments $5,000.00 per person,

 

(ii)                                   Umbrella/Excess Liability on a following form basis with the following minimum limits: General Aggregate $5,000,000.00(cumulative total); Each Occurrence $5,000,000.00(cumulative total);

 

(iii)                                Workers’ Compensation with statutory limits;

 

(iv)                               Employer’s Liability insurance with the following limits: Bodily injury by disease per person $1,000,000.00; Bodily injury by accident policy limit $1,000,000.00; Bodily injury by disease policy limit $1,000,000.00;

 

(v)                                  property insurance on special causes of loss insurance form covering any and all personal property of Tenant including but not limited to alterations, improvements, betterments, furniture, fixtures and equipment in an amount not less than their full replacement cost, with a deductible not to exceed $25,000.00; and

 

(vi)                               comprehensive automobile liability insurance having a combined single limit of not less than One Million Dollars ($1,000,000.00) per occurrence and insuring Tenant against liability for claims arising out of ownership, maintenance or use of any owned, hired or non-owned automobiles.

 

(b)                                  Not more often than once per year and upon not less than sixty (60) days’ prior written notice, Landlord, in its reasonable discretion, may require Tenant to increase the insurance limits set forth in Paragraph 14(a) above.

 

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(c)                                   All policies of liability insurance so obtained and maintained shall: be carried in the name of Tenant; name Landlord and Landlord’s designated agents as additional insureds; provide that the insurance policy so endorsed will be the primary insurance providing coverage for Landlord; and contain a cross-liability endorsement stating that the rights of insureds shall not be prejudiced by one insured making a claim or commencing an action against another insured. Any other liability insurance maintained by Landlord shall be excess and non-contributing. At Landlord’s election, such policies of Tenant shall name the holder of any Superior Interest or any other interested party as an insured party under a standard mortgagee endorsement.

 

(d)                                  All insurance policies required under this Lease shall provide that the insurer shall not cancel, reduce, modify or fail to renew such coverage without forty-five (45) days prior written notice to Landlord. Tenant shall deliver certificates of all insurance required hereunder prior to the commencement of the term of this Lease. In the event Tenant does not comply with the requirements of this Paragraph 14, Landlord may, at its option and at Tenant’s expense, purchase such insurance coverage to protect Landlord. The cost of such insurance shall be paid to Landlord by Tenant, as additional rent, immediately upon demand therefor, together with interest at the Interest Rate until paid.

 

(e)                                   The parties release each other, and their respective authorized representatives, from any claims for loss or damage that are caused by or result from perils insured under any insurance policies carried by the parties in force at the time of any such damage. Each party shall cause each insurance policy obtained by it to provide that the insurer waives all right of recovery by way of subrogation against either party in connection with any loss or damage covered by the policy. Neither party shall be liable to the other for any loss or damage caused by the insured risks under any insurance policy required by this Lease.

 

15.                                PROTECTION OF LENDERS.

 

(a)                                  This Lease shall be subject and subordinate at all times to all ground or underlying leases that may now or hereafter exist affecting the Building or the Real Property, or both, and to the lien of any mortgage or deed of trust in any amount or amounts whatsoever now or hereafter placed on or against the Building or the Real Property, or both, or on or against Landlord’s interest or estate therein (such mortgages, deeds of trust and leases are referred to herein, collectively, as “Superior Interests”), all without the necessity of any further instrument executed or delivered by or on the part of Tenant for the purpose of effectuating such subordination. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver, upon demand, such further instruments evidencing such subordination of this Lease to any such Superior Interest as may be required by Landlord. Landlord agrees to use good faith efforts to deliver to Tenant from any existing or future Holder (as defined below) a written subordination and non-disturbance agreement in recordable form acceptable to such Holder in its sole discretion providing that so long as Tenant performs all of the terms of this Lease, Tenant’s possession under this Lease shall not be disturbed and Tenant shall not be joined by the Holder in any action or proceeding to foreclose thereunder, except where such is necessary for jurisdictional or procedural reasons. Tenant shall pay all costs for legal services incurred by Landlord in obtaining that subordination and non-disturbance agreement.

 

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(b)                                                Notwithstanding the foregoing, in the event of a foreclosure of any such mortgage or deed of trust or of any other action or proceeding for the enforcement thereof, or of any sale thereunder, this Lease shall not be terminated or extinguished, nor shall the rights and possession of Tenant hereunder be disturbed, if no Event of Default then exists under this Lease, and Tenant shall attorn to the person who acquires Landlord’s interest hereunder through any such mortgage or deed of trust.

 

(c)                                                 Within ten (10) days after Landlord’s written request, Tenant shall deliver to Landlord, or to any actual or prospective holder of a Superior Interest (“Holder”) that Landlord designates, such financial statements as are reasonably required by such Holder to verify the financial condition of Tenant (or any assignee, subtenant or guarantor of Tenant). Tenant represents and warrants to Landlord and such Holder that each financial statement delivered by Tenant shall be accurate in all material respects as of the date of such statement. All financial statements shall be confidential and used only for the purposes stated herein.

 

(d)                                                If Landlord is in default, Tenant shall accept cure of any default by any Holder whose name and address shall have been furnished to Tenant in writing. Tenant may not exercise any rights or remedies for Landlord’s default unless Tenant gives notice thereof to each such Holder and the default is not cured within thirty (30) days thereafter or such greater time as may be reasonably necessary to cure such default. A default that cannot reasonably be cured within said 30-day period shall be deemed cured within said period if work necessary to cure the default is commenced within such time and proceeds diligently thereafter until the default is cured.

 

(e)                                                 If any prospective Holder should require, as a condition of any Superior Interest, a modification of the provisions of this Lease, Tenant shall approve and execute any such modifications promptly after request, provided no such modification shall relate to the Rental payable hereunder or the length of the term hereof or otherwise materially alter the rights or obligations of Landlord or Tenant hereunder.

 

16.                                ENTRY BY LANDLORD.

 

(a)                                  Landlord reserves, and shall at all times have, the right to enter the Premises upon 24-hours’ prior notice (which may be oral and is not required in the event of emergency or in the ordinary provisioning of services) to inspect them; to supply janitorial service and any other service to be provided by Landlord hereunder; to submit the Premises to prospective purchasers, mortgagees or tenants; to post notices of nonresponsibility; and to alter, improve or repair the Premises and any portion of the Building as permitted or provided hereunder, all without abatement of Rental; and may erect scaffolding and other necessary structures in or through the Premises where reasonably required by the character of the work to be performed; provided, however, that any such entrance or work shall not unreasonably interfere with Tenant’s use of the Premises. If such entry is made as aforesaid, Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by such entry. For each of the foregoing purposes, Landlord shall at all times have and retain a key and/or other access device with which to unlock all of the doors in, on and about the Premises (excluding Tenant’s vaults, safes and similar areas designated in writing by Tenant

 

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in advance and approved by Landlord); and Landlord shall have the right to use any and all means that Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any of said means, or otherwise, shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises, or any portion thereof.

 

(b)                                  Landlord also shall have the right at any time to change the arrangement or location or times of access of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets or other public parts of the Building, and to change the name, number or designation by which the Building is commonly known, and none of the foregoing shall be deemed an actual or constructive eviction of Tenant, nor shall it entitle Tenant to any reduction of Rental hereunder or result in any liability of Landlord to Tenant.

 

17.                                ABANDONMENT. Tenant shall not vacate or abandon the Premises or any part thereof at any time during the term hereof. Tenant understands that if Tenant leaves the Premises or any part thereof vacant, the risk of fire, other casualty and vandalism to the Premises and the Building will be increased. Accordingly, such action by Tenant shall constitute an immediate Event of Default hereunder regardless of whether Tenant continues to pay Basic Monthly Rental and other Rental under this Lease. If Tenant abandons, vacates or surrenders all or any part of the Premises or is dispossessed of the Premises by process of law, or otherwise, any movable furniture, equipment, trade fixtures, or other personal property belonging to Tenant and left on the Premises shall at the option of Landlord be deemed to be abandoned and, whether or not the property is deemed abandoned, Landlord shall have the right to remove such property from the Premises and charge Tenant for the removal and any restoration of the Premises as provided in Paragraph 8(a). Landlord may charge Tenant for the storage of Tenant’s property left on the Premises at such rates as Landlord may from time to time reasonably determine, or, Landlord may, at its option, store Tenant’s property in a public warehouse at Tenant’s expense. Notwithstanding the foregoing, neither the provisions of this Paragraph 17 nor any other provision of this Lease shall impose upon Landlord any obligation to care for or preserve any of Tenant’s property left upon the Premises, and Tenant hereby waives and releases Landlord from any claim or liability in connection with the removal of such property from the Premises and the storage thereof and specifically waives the provisions of California Civil Code Section 1542 with respect to such release. Landlord’s action or inaction with regard to the provisions of this Paragraph 17 shall not be construed as a waiver of Landlord’s right to require Tenant to remove its property, restore any damage to the Building caused by such removal or make any restoration required pursuant to Paragraph 8(a) hereof.

 

18.                                DEFAULT AND REMEDIES.

 

(a)                                  The occurrence of any one or more of the following events (each an “Event of Default”) shall constitute a breach of this Lease by Tenant:

 

(i)                                      Tenant fails to pay any Basic Monthly Rental or additional monthly rent under Paragraph 4(b) hereof as and when such rent becomes due and payable and such failure continues for more than three business (3) days after Landlord gives written notice thereof to Tenant; provided, however, that after the second such failure in a calendar year, only

 

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the passage of time, but no further notice, shall be required to establish an Event of Default in the same calendar year; or

 

(ii)                                   Tenant fails to pay any additional rent or other amount of money or charge payable by Tenant hereunder as and when such additional rent or amount or charge becomes due and payable and such failure continues for more than ten (10) days after Landlord gives written notice thereof to Tenant; provided, however, that after the second such failure in a calendar year, only the passage of time, but no further notice, shall be required to establish an Event of Default in the same calendar year; or

 

(iii)                                Tenant fails to perform or breaches any other agreement or covenant of this Lease to be performed or observed by Tenant as and when performance or observance is due and such failure or breach continues for more than ten (10) days after Landlord gives written notice thereof to Tenant; provided, however, that if, by the nature of such agreement or covenant, such failure or breach cannot reasonably be cured within such period of ten (10) days, an Event of Default shall not exist as long as Tenant commences with due diligence and dispatch the curing of such failure or breach within such period of ten (10) days and, having so commenced, thereafter prosecutes with diligence and dispatch and completes the curing of such failure or breach within a reasonable time; or

 

(iv)                               Tenant (A) is generally not paying its debts as they become due, (B) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy, insolvency or other debtors’ relief law of any jurisdiction, (C) makes an assignment for the benefit of its creditors, (D) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers of Tenant or of any substantial part of Tenant’s property, or (E) takes action for the purpose of any of the foregoing; or

 

(v)                                  Without consent by Tenant, a court or government authority enters an order, and such order is not vacated within thirty (30) days, (A) appointing a custodian, receiver, trustee or other officer with similar powers with respect to Tenant or with respect to any substantial part of Tenant’s property, or (B) constituting an order for relief or approving a petition for relief or reorganization or arrangement or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy, insolvency or other debtors’ relief law of any jurisdiction, or (C) ordering the dissolution, winding-up or liquidation of Tenant; or

 

(vi)                               This Lease or any estate of Tenant hereunder is levied upon under any attachment or execution and such attachment or execution is not vacated within thirty (30) days; or

 

(vii)                            Tenant vacates or abandons the Premises; or

 

(viii)                         If the performance of Tenant’s obligations under this Lease is guaranteed: (a) the death of a Guarantor, (b) the termination of a Guarantor’s liability with respect to this Lease other than in accordance with the terms of such guaranty, (c) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (d) a Guarantor’s revocation of or refusal to honor the guaranty, or (e) a Guarantor’s breach of its guaranty obligation on an

 

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anticipatory basis, and Tenant’s failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Tenant, equals or exceeds the combined financial resources of Tenant and the Guarantor that existed at the time of execution of this Lease.

 

(b)                                  If an Event of Default occurs, Landlord shall have the right at any time to give a written termination notice to Tenant and, on the date specified in such notice, Tenant’s right to possession shall terminate and this Lease shall terminate. Upon such termination, Landlord shall have the right to recover from Tenant:

 

(i)                                      The worth at the time of award of all unpaid rent that had been earned at the time of termination;

 

(ii)                                   The worth at the time of award of the amount by which all unpaid rent that would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided;

 

(iii)                                The worth at the time of award of the amount by which all unpaid rent for the balance of the term of this Lease after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and

 

(iv)                               All other amounts necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform all of Tenant’s obligations under this Lease or that in the ordinary course of things would be likely to result therefrom.

 

The “worth at the time of award” of the amounts referred to in clauses (i) and (ii) above shall be computed by allowing interest at the maximum annual interest rate allowed by law for business loans (not primarily for personal, family or household purposes) not exempt from the usury law at the time of termination or, if there is no such maximum annual interest rate, at the rate of eighteen percent (18%) per annum. The “worth at the time of award” of the amount referred to in clause (iii) above shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). For the purpose of determining unpaid rent under clauses (i), (ii) and (iii) above, the rent reserved in this Lease shall be deemed to be the total rent payable by Tenant under Articles 3 and 4 hereof; for purposes of computing Tenant’s Percentage Share of increases in Operating Expenses over the Base Year and Real Property Taxes over the Tax Base Year for the calendar year in which the default occurs and each future calendar year or portion thereof in the Lease Term, Tenant’s Percentage Share of increases in Operating Expenses and Real Property Taxes shall be assumed to be equal to the amount thereof for the calendar year prior to the year in which the default shall occur, increased annually at a rate equal to the average rate of increase, if any, in such items from the Commencement Date through the time of award.

 

(c)                                   Even though Tenant has breached this Lease, this Lease shall continue in effect for so long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have all of its rights and remedies, including the right, pursuant to California Civil Code Section 1951.4, to recover all rent as it becomes due under this Lease. Acts of maintenance or preservation or efforts to relet the Premises or the appointment of a receiver upon initiative of

 

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Landlord to protect Landlord’s interest under this Lease shall not constitute a termination of Tenant’s right to possession unless written notice of termination is given by Landlord to Tenant.

 

(d)                                  The remedies provided for in this Lease are in addition to all other remedies available to Landlord at law or in equity, by statute or otherwise. All costs incurred by Landlord in connection with collecting any Rent or other amounts and damages owing by Tenant pursuant to the provisions of this Lease, or to enforce any provision of this Lease, including reasonable attorneys’ fees from the date such matter is turned over to an attorney, whether or not one or more actions are commenced by Landlord, shall also be recoverable by Landlord from Tenant. If any notice and grace period required under subparagraphs 18(a)(i), (ii) or (iii) was not previously given, a notice to pay rent or quit, or to perform or quit, as the case may be, given to Tenant under any statute authorizing the forfeiture of leases for unlawful detainer shall also constitute the applicable notice for grace period purposes required by subparagraphs 18(a)(i), (ii) or (iii). In such case, the applicable grace period under subparagraphs 18(a)(i), (ii) or (iii) and under the unlawful detainer statute shall run concurrently after the one such statutory notice, and the failure of Tenant to cure the default within the greater of the two (2) such grace periods shall constitute both an unlawful detainer and an Event of Default entitling Landlord to the remedies provided for in this Lease and/or by said statute.

 

(e)                                   In the event that Tenant’s right of possession of the Premises is terminated prior to the end of the initial Term by reason of an Event of Default by Tenant, then immediately upon such termination, an amount shall be due and payable by Tenant to Landlord equal to the unamortized portion as of that date (which amortization shall be based on an interest rate of eleven percent (11%) per annum) of the sum of (a) the cost of Landlord’s Work (if any), (b) the Allowance (if any), (c) the value of any free Rent (i. e., the Rent stated in this Lease to be abated as an inducement to Tenant’s entering into this Lease) enjoyed as of that date by Tenant, and (d) the amount of all commissions paid by Landlord in order to procure this Lease.

 

19.                      DAMAGE BY FIRE OR OTHER CASUALTY.

 

(a)                                  If the Premises are partially destroyed or damaged by fire or other casualty, Landlord shall, subject to Paragraph 19(b), 19(c), 19(d) and 19 (e) below, promptly repair such damage if, in Landlord’s judgment, such repair can be completed within ninety (90) days under the laws and regulations of the state, federal, county and municipal authorities having jurisdiction, and this Lease shall remain in full force and effect, provided that if there shall be damage to the Premises from any such cause and such damage is not the result of the act, neglect, default or omission of Tenant, its agents, employees, contractors or invitees, Tenant shall be entitled to a reduction of Basic Monthly Rental while such repair is being made in the proportion that the area of the Premises rendered untenantable by such damage bears to the total area of the Premises. Tenant’s right to a reduction of Basic Monthly Rental under this Paragraph 19 shall be Tenant’s sole remedy in connection with any such damage.

 

(b)                                  If such repairs, in Landlord’s judgment, cannot be completed within ninety (90) days, or if such damage occurs during the last six (6) months of the term of this Lease, Landlord shall have the option either (i) to repair such damage, this Lease continuing in full force and effect, but with the Basic Monthly Rental proportionately reduced (subject to the condition set forth in Paragraph 19 (a) above), or (ii) to give notice to Tenant at any time within

 

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thirty (30) days after the occurrence of such damage terminating this Lease as of a date specified in such notice, which termination date shall not be less than thirty (30) nor more than sixty (60) days after the giving of such notice. If such notice of termination is so given, the Lease and all interest of Tenant in the Premises shall terminate on the date specified in such notice, and the Basic Monthly Rental, reduced (subject to the condition set forth in Paragraph 19(a) above) in proportion to the area of the Premises rendered untenantable by the damage, shall be paid up to the date of such termination, Landlord hereby agreeing to refund to Tenant any Rental theretofore paid for any period of time subsequent to the termination date.

 

(c)                                   If the Building is damaged by fire or other casualty to the extent that the repair cost would exceed twenty percent (20%) or more of its replacement value, or if more than twenty percent (20%) of the rentable area of the Building is affected by fire or other casualty and repairs to the Building cannot, in Landlord’s judgment, be completed within ninety (90) days, or if insurance proceeds sufficient to complete the repairs are not available due to exercise of rights of a Holder to collect such proceeds, then in any such case, whether the Premises are damaged or not, Landlord shall have the right, at its option, to terminate this Lease by giving Tenant notice thereof within thirty (30) days of such casualty specifying the date of termination, which termination date shall not be less than thirty (30) nor more than sixty (60) days after the giving of such notice.

 

(d)                                  If the Premises are damaged by fire or other casualty not resulting in whole or in part from the negligence or willful misconduct of Tenant or its employees, agents, contractors or subtenants and the repair to the Premises cannot, in Landlord’s judgment, be completed within one hundred eighty (180) days, assuming the availability of labor and materials, then Tenant at its option may terminate this Lease. Tenant’s notice to Landlord of Tenant’s election to terminate the Lease under the preceding sentence must be delivered to Landlord within thirty (30) days after the occurrence of such damage, and the termination shall be effective as of a date specified in such notice, which termination date shall be no less than thirty (30) nor more than sixty (60) days after the giving of such notice. In the event of a termination of the Lease by Tenant under this Paragraph 19(d), the Basic Monthly Rental shall be reduced in the same manner as provided under Paragraph 19(b) above. If Tenant shall notify Landlord as to Tenant’s election to terminate this Lease, Landlord shall have the right by giving Tenant notice within twenty (20) days of Landlord’s receipt of Tenant’s election notice, to relocate Tenant in substantially similar space in the Building or in another building in the general vicinity of the Building within thirty (30) days of the date of Tenant’s notice to Landlord, in which case the Lease then shall be deemed to have not been terminated. If Landlord so elects to relocate Tenant, Landlord shall bear the cost of moving Tenant to such other space, Tenant shall continue to pay Basic Monthly Rental and other Rental to Landlord as provided herein and Landlord shall bear the cost of any rental in excess thereof for such other space. Tenant’s occupancy of such other space shall not exceed one (1) year from the commencement of such occupancy. In the event Landlord cannot complete repairs to the Premises within one (1) year from the date of Tenant’s commencement of occupancy in such other space, Landlord shall notify Tenant in writing not later than sixty (60) days prior to the expiration of such one-year period and upon expiration of such one-year period, this Lease shall terminate. In the event Landlord can complete such repairs within such one-year period, Landlord shall so notify Tenant in writing and shall move Tenant back into the Premises as soon as practicable after such repairs

 

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have been completed. The cost of moving Tenant back into the Premises shall be borne by Landlord.

 

(e)                                   Notwithstanding any of the provisions of this Lease, Landlord shall in no event be required to repair any injury or damage by fire or other cause whatsoever to, or to make any repairs or replacements of, any panelings, decorations, partitions, railings, ceilings, floor coverings, equipment, trade or office fixtures or any other property of, or improvements (including the Tenant Improvements and any Alterations) installed on the Premises by or at the election of, Tenant. Tenant hereby agrees to promptly repair any damage to the Tenant Improvements and any Alterations at its sole cost and expense in the event that Landlord is required to, or elects to, repair the remainder of the Premises pursuant to Paragraphs19 (a) or 19(b) above.

 

(f)                                    Tenant hereby waives the provisions of subsection 2 of Section 1932, subsection 4 of Section 1933, and Sections 1941 and 1942 of the California Civil Code.

 

20.                           EMINENT DOMAIN.

 

(a)                                  If all or part of the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, this Lease shall terminate as to any portion of the Premises so taken or conveyed on the date when title or the right to possession vests in the condemnor.

 

(b)                                  If (i) a part of the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof; and (ii) Tenant is reasonably able to continue the operation of Tenant’s business in that portion of the Premises remaining; and (iii) Landlord elects to restore the Premises to an architectural whole, then this Lease shall remain in effect as to said portion of the Premises remaining, and the Basic Monthly Rental payable from the date of the taking shall be reduced in the same proportion as the area of the Premises taken bears to the total area of the Premises. If, after a partial taking, Tenant is not reasonably able to continue the operation of its business in the Premises or Landlord elects not to restore the Premises as hereinabove described, then this Lease may be terminated by either Landlord or Tenant by giving written notice to the other party within thirty (30) days of the date of the taking. Such notice shall specify the date of termination, which termination date shall be not less than thirty (30) nor more than sixty (60) days after the date of said notice.

 

(c)                                   If a portion of the Building is taken, whether any portion of the Premises is taken or not, and Landlord determines that it is not economically feasible to continue operating the portion of the Building remaining, then Landlord shall have the option for a period of thirty (30) days after such determination to terminate this Lease. If Landlord determines that it is economically feasible to continue operating the portion of the Building remaining after such taking, then this Lease shall remain in effect, with Landlord, at Landlord’s cost, restoring the Building to an architectural whole.

 

(d)                                  Landlord shall be entitled to any and all payment, income, rent, award, or any interest therein whatsoever that may be paid or made in connection with such taking or conveyance, and Tenant shall have no claim against Landlord or otherwise for the value of any

 

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unexpired term of this Lease or for the value of any improvements in or to the Premises. Tenant hereby assigns any such claim to the Landlord. Notwithstanding the foregoing, to the extent that the same shall not diminish Landlord’s recovery for such taking, Tenant shall have the right to make a claim directly to the entity expressing the power of eminent domain for moving expenses and for loss or damage to Tenant’s trade fixtures, equipment and movable furniture.

 

(e)                                   Tenant hereby waives sections 1265.110 through 1265.160 of the California Code of Civil Procedure.

 

21.                                HOLDING OVER. Any holding over after the expiration or other termination of the term of this Lease with the prior written consent of Landlord delivered to Tenant shall be construed to be a tenancy from month-to-month at the Basic Monthly Rental in effect on the date of such expiration or termination (subject to adjustment as provided in Paragraph 3(a) hereof) on the terms, covenants and conditions herein specified so far as applicable. Any holding over after the expiration or other termination of the term of this Lease without the prior written consent of Landlord shall be construed to be a tenancy at sufferance on all the terms set forth herein, except that the Basic Monthly Rental shall be an amount equal to two hundred percent (200%) of the Basic Monthly Rental payable by Tenant immediately prior to such holding over. Acceptance by Landlord of Rental after the expiration or termination of this Lease shall not constitute a consent by Landlord to any such tenancy from month to month or result in any other tenancy or any renewal of the term hereof. The provisions of this Paragraph are in addition to, and do not affect, Landlord’s right to re-entry or other rights hereunder or provided by law.

 

22.                                INTENTIONALLY OMITTED.

 

23.                                MISCELLANEOUS.

 

(a)                                  Any liability of Landlord (including without limitation Landlord’s members, partners, shareholders, affiliates, agents, and employees) to Tenant under this Lease shall be limited to the equity interest of Landlord in the Real Property, and Tenant agrees to look solely to such interest for the recovery of any judgment, it being intended that Landlord and such other persons shall not be personally liable for any deficiency or judgment. Notwithstanding any other provision of this Lease, Landlord shall not be liable for any consequential damages, nor shall Landlord be liable for loss of or damage to artwork, currency, jewelry, bullion, unique or valuable documents, securities or other valuables, or for other property not in the nature of ordinary fixtures, furnishings and equipment used in general office activities and functions. Wherever in this Lease Tenant (a) releases Landlord from any claim or liability, (b) waives or limits any right of Tenant to assert any claim against Landlord or to seek recourse against any property of Landlord or (c) agrees to indemnify Landlord against any matters, the relevant release, waiver, limitation or indemnity shall run in favor of and apply to Landlord, its agents, the constituent shareholders, partners or other owners of Landlord or its agents, and the directors, officers, and employees of Landlord and its agents and each such constituent shareholder, partner or other owner.

 

(b)                                  In the event of a sale or conveyance of the Building by Landlord, the transferor shall thereby be released from any further liability under this Lease arising after the making of such transfer, and, in such event, Tenant agrees to look solely to the successor in

 

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interest of such transferor in and to the Building and this Lease. Tenant agrees to attorn to the successor in interest of such transferor. If Tenant provides Landlord with any security for Tenant’s performance of its obligations hereunder, and Landlord transfers, or provides a credit (that is treated by the recipient as a transfer) with respect to, such security to the grantee or transferee of Landlord’s interest in the Real Property, Landlord shall be released from any further responsibility or liability for such security.

 

(c)                                   Tenant shall, at any time and from time to time within ten (10) days following request from Landlord, execute, acknowledge and deliver to Landlord a statement in writing, (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect), (ii) certifying that there are not, to Tenant’s knowledge, any uncured defaults on the part of the Landlord hereunder and that Tenant has no defenses to or offsets against its obligations under this Lease, or specifying such defaults, defenses or offsets if any are claimed, (iii) certifying the date that Tenant entered into occupancy of the Premises and that Tenant is open for business in the Premises, (iv) certifying the amount of the Basic Monthly Rental and the Rental payable under Paragraph 4(a) and the date to which Rental is paid in advance, if any, and certifying that Tenant is entitled to no rent abatement or other economic concessions not specified in the Lease (v) evidencing the status of this Lease as may be required either by a lender making a loan affecting, or a purchaser of, the Premises, the Building, the Real Property or any interest therein from Landlord, (vi) certifying the amount of the Deposit, if any, (vii) certifying that all Improvements to be constructed in the Premises by Landlord are completed (or specifying any obligations of Landlord respecting Improvements), and (viii) certifying such other matters relating to this Lease and/or the Premises as may be requested by a lender making a loan to Landlord or a purchaser of the Premises, the Building, the Real Property or any interest therein from Landlord. Any such statement may be relied upon by, and shall upon Landlord’s request be addressed to, any prospective purchaser or encumbrancer of all or any portion of the Real Property or any interest therein. Tenant shall, within ten (10) days following request of Landlord, deliver such other documents regarding Tenant’s financial situation including Tenant’s financial statements as are reasonably requested in connection with the sale of, or loan to be secured by, the Real Property or any part thereof or interest therein. Tenant’s failure to deliver said statement in the time required shall entitle Landlord to make a second written request for said statement, and Tenant’s failure to deliver said statement within three (3) days thereafter shall be conclusive upon Tenant that: (i) the Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord’s performance and Tenant has no right of offset, counterclaim or deduction against Rental under the Lease and (iii) no more than one month’s Basic Monthly Rental has been paid in advance.

 

(d)                                  On or before April 1 of each year throughout the Term, Tenant shall deliver to Landlord Tenant’s financial statements (“Financial Statements”) for the fiscal year of Tenant ended on the previous December 31, which Financial Statements shall include a combined balance sheet of Tenant and its combined subsidiaries as at the end of such fiscal year, a combined statement of operations of Tenant and its combined subsidiaries for such fiscal year, and a certificate of Tenant’s auditor (or, if audited Financial Statements are not available, then a certificate of Tenant’s Chief Financial Officer) to the effect that such Financial Statements were prepared in accordance with generally accepted accounting principles, consistently applied, and

 

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fairly present the financial condition and operations of Tenant and its combined subsidiaries for and as at the end of such fiscal year.

 

(e)                                   All terms and covenants of this Lease to be performed or observed by Tenant shall be performed or observed by Tenant at Tenant’s expense and without any reduction of Rental. If Tenant fails to pay any Rental hereunder or fails to perform any other term or covenant hereunder on its part to be performed, and such failure constitutes an Event of Default, Landlord, without waiving or releasing Tenant from any obligation of Tenant hereunder, may make any such payment or perform any such other term or covenant on Tenant’s part to be performed but shall not be obligated to do so. All sums so paid by Landlord and all necessary costs of such performance by Landlord, together with interest thereon at the Interest Rate from the date of such payment or performance by Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord on demand by Landlord, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of nonpayment thereof by Tenant as in the case of failure by Tenant in the payment of Rental hereunder.

 

(f)                                    Tenant agrees to faithfully observe and to comply with the Building Rules and Regulations attached hereto as Exhibit B and incorporated herein by this reference, and all modifications of and additions thereto from time to time put into effect by Landlord that are applicable to all tenants of the Building and of which Tenant shall have notice. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Building of any of said Building Rules and Regulations. In the event any of the Building Rules and Regulations conflict with any express provision of this Lease, the provisions of this Lease shall govern.

 

(g)                                   In case any suit or other proceeding shall be brought for an unlawful detainer of the Premises or for the recovery of any Rental due under the provisions of this Lease or because of the failure of performance or observance of any other term or covenant herein contained on the part of Landlord or Tenant, including any proceeding or action in a bankruptcy case, the unsuccessful party in such suit or proceeding shall pay to the prevailing party therein reasonable attorneys’ fees and costs, which shall include fees and costs of any appeal, all as fixed by the Court. If Landlord or Tenant should be named as a defendant in any suit brought against the other in connection with Tenant’s occupancy of the Premises under this Lease, the party defendant primarily responsible for the bringing of such suit shall pay to the other party its costs and expenses incurred in such suit and reasonable attorneys’ fees.

 

(h)                                  If any action or proceeding between Landlord and Tenant to enforce the provisions of this Lease (including an action or proceeding between Landlord and the trustee or debtor in possession while Tenant is a debtor in a proceeding under any bankruptcy law) proceeds to trial, Landlord and Tenant hereby waive their respective rights to a jury in such trial.

 

(i)                                      The failure of either Landlord or Tenant to object to or to assert any remedy by reason of the other’s failure to perform or observe any covenant or term hereof or Landlord’s or Tenant’s failure to assert any rights by reason of the happening or non-happening of any condition hereof shall not be deemed a waiver of its right to assert and enforce any remedy it may have by reason of such failure on the part of the other or the happening or non-

 

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happening of such condition or a waiver of its rights to enforce any of its rights by reason of any subsequent failure of the other to perform or observe the same or any other term or covenant or by reason of the subsequent happening or non-happening of the same or any other condition. No custom or practice that may develop between the parties hereto during the term hereof shall be deemed a waiver of, or in any way affect, the right of Landlord or Tenant to insist upon performance and observance by the other in strict accordance with the terms hereof. The acceptance of Rental hereunder by Landlord shall not be deemed to be a waiver of any preceding failure of Tenant to perform or observe any term or covenant of this Lease, other than the failure of Tenant to pay the particular Rental so accepted, irrespective of any knowledge on the part of Landlord of such preceding failure at the time of acceptance of such Rental. Landlord’s acceptance of partial payment of rent does not constitute a waiver of any rights, including without limitation any right Landlord may have to recover possession of the Premises.

 

(j)                                     Tenant agrees that no diminution or shutting off of light, air or view by any structure that may be erected (whether or not by Landlord) on property adjacent to the Building shall in any way affect this Lease, entitle Tenant to any reduction of Rental hereunder or result in any liability of Landlord to Tenant.

 

(k)                                  All notices, demands, requests, advices or designations (“Notices”) that may be or are required to be given by either party to the other hereunder shall be in writing. All Notices by Landlord to Tenant shall be sufficiently given, made or delivered if personally served (including delivery by messenger or nationally-recognized overnight mail courier) on Tenant by leaving the same at the Premises, or if sent by United States certified or registered mail, postage prepaid, addressed to Tenant at Tenant’s address for notices as set forth in the Summary of Lease Terms. All Notices by Tenant to Landlord shall be sufficiently given, made or delivered if personally served (including delivery by messenger or nationally-recognized overnight mail courier) on Landlord, or sent by United States certified or registered mail, postage prepaid, addressed to Landlord at Landlord’s address for notices specified in Paragraph B of the Summary of Lease Terms. Each Notice shall be deemed received on the date of the personal service or three (3) days after the mailing thereof, in the manner herein provided, as the case may be.

 

(l)                                      Tenant agrees that it shall not, without first obtaining the written consent of Landlord (which consent may be withheld in Landlord’s sole and absolute discretion): (i) use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises; or (ii) use for any purpose any image of, rendering of, or design based on, the exterior appearance or profile of the Building.

 

(m)                              This Lease shall in all respects be governed by and construed in accordance with the laws of California. If any provision of this Lease shall be invalid, unenforceable or ineffective for any reason whatsoever, all other provisions hereof shall be and remain in effect.

 

(n)                                  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The term “Landlord” or any pronoun used in place thereof includes the plural as well as the singular and the successors and assigns of Landlord. The term “Tenant” or any pronoun used in place thereof includes the plural as well as the

 

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singular and each of their respective heirs, executors, administrators, successors and permitted assigns, according to the context hereof. The provisions of this Lease shall inure to the benefit of and bind Landlord and Tenant and their respective heirs, executors, administrators, successors and permitted assigns. The term “person” includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations. Words used in any gender include the other gender. If there be more than one Tenant the obligations of Tenant hereunder are joint and several. The Paragraph headings of this Lease are for convenience of reference only and shall have no effect upon the construction or interpretation of any provision hereof.

 

(o)                                  Time is of the essence of this Lease with respect to the payment of Rental and the performance of all obligations.

 

(p)                                  Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and this instrument is not effective as a lease or otherwise until its execution and delivery by both Landlord and Tenant.

 

(q)                                  Tenant agrees to protect, defend, indemnify and hold Landlord harmless from any and all claims, loss, cost, damage and/or expense (including, without limitation, attorneys’ fees and court costs) by any real estate broker or salesperson or other entity or party for a commission or finder’s fee as a result of Tenant’s entering into this Lease, other than the Brokers identified in Paragraph K of the Summary of Lease Terms, if and to the extent such other real estate broker or salesperson or other entity or party bases such claim on its dealings with Tenant.

 

(r)                                     Landlord agrees to list Tenant’s name on the directory board in the lobby of the Building and on the Building standard signage in the elevator lobbies of the third floor and to provide Building standard signage on the door to the Premises, at Landlord’s cost and expense; provided, however, any change to the initial listing or any additional listings shall be at Tenant’s cost and expense. Landlord’s acceptance of any name for listing on the directory board, the standard signage or any exterior sign shall in no event be, or be deemed to be, nor will it substitute for, Landlord’s consent, as required by this Lease, to any sublease, assignment, or other occupancy of the Premises.

 

(s)                                    Tenant may, at Tenant’s sole cost and expense, install one elevator lobby sign identifying Tenant’s name and logo in the 4 th  floor elevator lobby (the “Tenant’s Signage”) that is the equivalent of the ngmoco signage existing on the date of this Lease. The costs of the actual sign comprising Tenant’s Signage and the installation, design, construction, and any and all other costs associated with Tenant’s Signage, including, without limitation and maintenance and repairs, shall be the sole responsibility of Tenant. Should Tenant’s Signage require repairs and/or maintenance, as determined in Landlord’s reasonable judgment, Landlord shall have the right to provide notice thereof to Tenant and Tenant (except as set forth above) shall cause such repairs and/or maintenance to be performed within fifteen (15) business days after receipt of such notice from Landlord, at Tenant’s sole cost and expense. Should Tenant fail to perform such repairs and/or maintenance within the periods described in the immediately preceding sentence, Landlord shall, upon the delivery of an additional five (5) business days’ prior written notice, have the right to cause such work to be performed and to charge Tenant as additional rent for the cost of such work. At the expiration or earlier termination of this Lease or termination of

 

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Tenant’s sign rights as provided below, Landlord shall, at Tenant’s sole cost and expense, cause the Tenant’s Signage to be removed and the area of the Building affected by Tenant’s Signage to be restored to the condition existing prior to the installation of Tenant’s Signage. The right to Tenant’s Signage is personal to the initially named Tenant in this Lease, provided that said right shall not terminate by reason of a Transfer pursuant to Paragraphs 12(e), 12(f) or 12(h). All of Tenant’s rights to install and maintain Tenant’s Signage in accordance with this Paragraph 23(a) shall permanently terminate upon the first to occur of the following: (i) Landlord’s recapture of the Suites 310/410 Premises pursuant to Paragraph 12(b); (ii) Tenant ceases to occupy at least a portion of the Suites 310/410 Premises for a period in excess of ninety (90) days, unless Tenant is in occupancy of all of the Suite 420 Premises; or (iii) Tenant exercises its right under Paragraph 2(d) to terminate the Lease as to the Suites 310/410 Premises.

 

(t)                                     If Tenant is a corporation (or other business organization), Tenant and each person executing this Lease on behalf of Tenant represents and warrants to Landlord that (a) Tenant is duly incorporated (or organized) and validly existing under the laws of its state of incorporation (or organization), (b) Tenant is qualified to do business in California, (c) Tenant has full right, power and authority to enter into this Lease and to perform all of Tenant’s obligations hereunder, and (d) the execution, delivery and performance of this Lease has been duly authorized by Tenant and each person signing this Lease on behalf of the Tenant is duly and validly authorized to do so. Not more than twenty (20) days after signing this Lease, Tenant shall deliver to Landlord a true and correct copy of resolutions duly adopted by the board of directors of Tenant, that authorize each person signing this Lease on behalf of Tenant to do so.

 

(u)                                  This Lease may not be amended or modified in any respect whatsoever, except by an instrument in writing signed by Landlord and Tenant.

 

(v)                                  The Exhibits and Addenda referenced in the Summary of Lease Terms are a part of this Lease and are incorporated herein by this reference. In the event of any discrepancy between the Lease and any such Exhibit or Addendum, the Exhibit or Addendum shall control. This Lease is the entire and integrated agreement between Landlord and Tenant with respect to the subject matter of this Lease, the Premises and the Building. There are no oral agreements between Landlord and Tenant affecting this Lease, and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, offers, agreements and understandings, oral or written, if any, between Landlord and Tenant or displayed by Landlord to Tenant with respect to the subject matter of this Lease, the Premises or the Building. There are no representations between Landlord and Tenant or between any real estate broker and Tenant other than those expressly set forth in this Lease and all reliance with respect to any representations is solely upon representations expressly set forth in this Lease.

 

(w)                                This Lease may be executed in counterparts, all of which shall constitute the same Lease, notwithstanding that all parties to this Lease are not signatory to the same or original counterpart. Delivery of an executed counterpart of this Lease by telefacsimile shall be equally as effective as delivery of an original executed counterpart. Any party delivering an executed counterpart of this Lease by telefacsimile also shall deliver an original executed counterpart of this Lease, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability and binding effect of this Lease. Signature and

 

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acknowledgment pages may be detached from the counterparts and attached to a single copy of this Lease to physically form one (1) document.

 

24.                                ERISA. To satisfy compliance with the Employee Retirement Income Security Act of 1974, as amended, Tenant represents and warrants to Landlord and The Prudential Insurance Company of America, a New Jersey corporation (“Prudential”), that:

 

(a)                                  Tenant is not an “employee benefit plan” (as that term is defined in Section 3(3) of ERISA); and

 

(b)                                  Tenant is not acquiring the Property as a plan asset subject to ERISA but for Tenant’s own investment account; and

 

(c)                                   Tenant is not an “affiliate” of Prudential as defined in Section IV(b) or PTE 90-1;

 

(d)                                  Tenant is not a “party in interest” (as that term is defined in Section 3(14) of ERISA) to the Virginia Retirement System; and

 

(e)                                   Tenant agrees to keep the identity of the Virginia Retirement System confidential, except to the extent that Tenant may be required to disclose such information as a result of (i) legal process, or (ii) compliance with ERISA or other Laws governing Tenant’s operations.

 

25.                                PARKING.

 

(a)                                  Upon payment of the Parking Rental (defined below), Tenant shall have the right to lease on a non-exclusive basis up to the level of one (1) unreserved parking space in the Parking Lot for every one thousand (1,000) square feet of rentable area of the Premises (“Tenant’s Allotted Spaces”). The use of Tenant’s Allotted Spaces shall be for the parking of motor vehicles used by Tenant, its officers, employees and customers only, and shall be subject to all applicable laws and the reasonable, uniform and non-discriminatory rules and regulations adopted by Landlord from time to time for the use of the Parking Lot. The Parking Rental payable by Tenant hereunder shall include all taxes imposed on the use of the parking spaces by any governmental or quasi-governmental authority. Parking Rental shall be due and payable in advance, as additional rent, on the first day of each month during which parking spaces are leased hereunder. Parking spaces may not be assigned or transferred separate and apart from this Lease, and upon the expiration or earlier termination of this Lease, Tenant’s rights with respect to all leased parking spaces shall immediately terminate. Tenant and its agents, employees, contractors, invitees or licensees shall not unreasonably interfere with the rights of Landlord or others entitled to similar use of the Parking Lot. Access to the Parking Lot will generally be available on a twenty-four (24) hour basis, with in and out privileges. Tenant shall have the right, upon at least thirty (30) days’ prior written notice to Landlord, to elect not to lease some or all of the Allotted Spaces. If Tenant so relinquishes its rights to any Allotted Spaces, upon Tenant’s written request to Landlord at any time, Tenant shall be eligible to re-lease its relinquished parking spaces on a first-come, first-served basis if such spaces are available.

 

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(b)                                  The Parking Lot shall be subject to the reasonable control and management of Landlord, who may, from time to time, establish, modify and enforce reasonable, uniform and non-discriminatory rules and regulations with respect thereto. Landlord reserves the right to change, reconfigure, or rearrange the parking areas, to reconstruct or repair any portion thereof, and to restrict the use of any parking areas and do such other acts in and to such areas as Landlord deems necessary or desirable without such actions being deemed an eviction of Tenant or a disturbance of Tenant’s use of the Premises and without Landlord’s being deemed in default hereunder; provided that Landlord shall use commercially reasonable efforts to minimize (to the extent consistent with applicable laws) the extent and duration of any resulting interference with Tenant’s parking rights. Landlord may, in its sole discretion, convert the Parking Lot to a reserved and/or controlled parking facility, or operate the Parking Lot (or a portion thereof) as an attendant assisted and/or valet parking facility.

 

(c)                                   If parking spaces are not assigned pursuant to the terms of this Lease, Landlord reserves the right at any time to assign parking spaces in a reasonable manner, and Tenant shall thereafter be responsible for insuring that its employees park in the designated areas. Tenant shall, if requested by Landlord, comply with all reasonable parking practices and otherwise furnish Landlord with such information as Landlord reasonably requests. Landlord shall not be liable for any damage of any nature to, or any theft of, vehicles or the contents thereof in or about the Parking Lot. At Landlord’s request, Tenant shall request that its employees and agents using Tenant’s parking spaces to execute an agreement confirming the foregoing.

 

(d)                                  “Parking Rental” shall mean ($225) per space for the first month of the Term, and thereafter the current parking rental rate per parking space being charged by Landlord for monthly parking in the Parking Lot.

 

(e)                                   Subject to availability, Landlord will attempt to provide additional parking spaces in the Parking Lot on a month-to-month basis if requested by Tenant.

 

26.                           LETTER OF CREDIT

 

(a)                                  Letter of Credit .  Tenant agrees to provide, at Tenant’s sole cost and expense, a Letter of Credit (as defined below) in the Letter of Credit Required Amount (as defined below) as additional security for the faithful performance and observance by Tenant of all of the provisions of this Lease, on the terms and conditions set forth below. The use, application or retention of the Letter of Credit, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by law, it being intended that Landlord shall not first be required to proceed against the Letter of Credit and the Letter of Credit shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. As used herein the term “Letter of Credit Required Amount” initially means $682,448.00. Subject to the remaining terms of this Paragraph 26, and provided the Reduction Conditions (as defined below) have been satisfied at the particular reduction effective date, Tenant shall have the right to reduce the Letter of Credit Required Amount so that the new Letter of Credit Required Amount shall be $341,224.00 (the “New Required Amount”) effective as of the first day of the thirty-seventh (37 th ) month of the Term. If Tenant is entitled to a reduction in the Letter of Credit Required Amount, Tenant shall provide Landlord with written

 

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notice requesting that the Letter of Credit Required Amount be reduced as provided above (the “Reduction Notice”). The Reduction Notice must include copies of Tenant’s financial statements covering at least the 12-month period ending on the most recent completed fiscal quarter prior to the date the Reduction Conditions must be satisfied (collectively, the “Required Financial Statements”) in a form reasonably acceptable to Landlord and Tenant’s calculation of EBITDA Margin (as defined below) and the Interest Coverage Ratio (as defined below) based on those Required Financial Statements showing that the applicable Reduction Conditions have been satisfied. If Tenant provides Landlord with a Reduction Notice, and Tenant is entitled to reduce the Required Amount as provided herein, the reduction shall be effectuated by Tenant replacing the Letter of Credit then being held by Landlord with a new Letter of Credit in the New Required Amount or amending the then-existing Letter of Credit to that New Required Amount. The term “Reduction Conditions” means the following conditions which, as to clauses (i) and (ii), have been satisfied in the Required Financial Statements as determined by Landlord:

 

(i)                                      EBITDA Margin for the prior twelve months is not less than 15%.

 

(ii)                                   Interest Coverage Ratio for the prior twelve months is not less than 1.6X.

 

(iii)                                No Event of Default shall have occurred and be continuing under this Lease.

 

As used in this Paragraph 26(a), the following terms shall have the following meanings.

 

(1)                                  “EBITDA” means Income (Loss) before income taxes plus interest expense plus depreciation and amortization plus any write-downs of goodwill or intangibles, all as disclosed in Tenant’s financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America;

 

(2)                                  “EBITDA Margin” means EBITDA as a percentage of Revenue; and

 

(3)                                  “Interest Coverage Ratio” means (A) EBITDA, divided by (B) interest expense. If Tenant makes an acquisition during the period of time for which the Interest Coverage Ratio is being calculated which requires the issuance of additional debt, then the Tenant will also provide a proforma Interest Coverage Ratio calculation which assumes the debt issued for the acquisition was done so at the beginning of the 12 month period for which the Interest Coverage Ratio is being calculated.

 

In the event that Reduction Conditions are not satisfied at the first day of the thirty-seventh (37 th ) month of the Term, then Tenant shall have the right annually thereafter to reduce the Letter of Credit Required Amount to the New Required Amount on any such anniversary date on which the Reduction Conditions are satisfied, by following the reduction procedures of this Paragraph 26(a).

 

(b)                                  Delivery of Letter of Credit .  (i) Tenant shall cause a Letter of Credit, in the amount of the Letter of Credit Required Amount to be issued by the L/C Bank (as defined below) in favor of Landlord, and its successors, assigns and transferees; (ii) Tenant will cause the Letter of Credit to remain in full force and effect during the entire Term and thereafter until

 

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thirty (30) days after expiration or earlier termination of the Lease; and (iii) the initial Letter of Credit will be delivered to Landlord no later than the date upon which Landlord delivers possession of any portion of the Premises to Tenant. So long as no Event of Default then exists, Landlord shall return the Letter of Credit to Tenant within 30 days after the expiration or earlier termination of the Lease. The specific requirements for the Letter of Credit and the rights of Landlord to make draws thereon will be as set forth in this Paragraph 26. All of Tenant’s rights and all of Landlord’s obligations under this Lease are strictly contingent on Tenant’s delivering and thereafter causing the Letter of Credit to remain in full force and effect during the entire Term.

 

(c)                                   Draws on the Letter of Credit .  Immediately upon, and at any time or from time to time after, the occurrence of any one or more Draw Events (as defined below), Landlord will have the unconditional right to draw on the Letter of Credit in accordance with this Paragraph 26. Upon the payment to Landlord of the Draw Proceeds, Landlord will hold the Draw Proceeds in its own name and for its own account, without liability for interest, to use and apply any and all of the Draw Proceeds only (a) to cure any Event of Default by Tenant; (b) to pay any other sum to which Landlord becomes obligated by reason of Tenant’s failure to carry out its obligations under this Lease; or (c) to compensate Landlord for any monetary loss or damage which Landlord suffers thereby arising from Tenant’s failure to carry out its obligations under this Lease. In addition, if the Draw Event is the failure of Tenant to renew the Letter of Credit as required hereunder, then Landlord shall be entitled to draw the entire Letter of Credit as a cash security deposit, held as a pledge under the California Uniform Commercial Code to secure Tenant’s obligations under this Lease. Among other things, it is expressly understood that the Draw Proceeds will not be considered an advance payment of Base Rent or Additional Rent or a measure of Landlord’s damages resulting from any Event of Default hereunder (past, present or future). Further, immediately upon the occurrence and during the continuance of any one or more Draw Events, Landlord may, from time to time and without prejudice to any other remedy, use the Draw Proceeds (whether from a contemporaneous or prior draw on the Letter of Credit) to the extent necessary to make good any arrearages of Base Rent or Additional Rent, to pay to Landlord any and all amounts to which Landlord is entitled in connection with the pursuit of any one or more of its remedies hereunder, and to compensate Landlord for any and all other damage, injury, expense or liability caused to Landlord by any and all such Events of Default. Any delays in Landlord’s draw on the Letter of Credit or in Landlord’s use of the Draw Proceeds as provided in this Paragraph 26 will not constitute a waiver by Landlord of any of its rights hereunder with respect to the Letter of Credit or the Draw Proceeds. Following any such application of the Draw Proceeds and Landlord’s written notice to Tenant thereof, Tenant will either pay to Landlord on demand the cash amount so applied in order to restore the Draw Proceeds to the full amount thereof immediately prior to such application or cause the Letter of Credit to be replenished to its full amount thereunder. Failure to either pay that cash amount or cause the Letter of Credit to be replenished to its full amount thereunder within three (3) business days after that application of the Draw Proceeds shall constitute an Event of Default without the right to any notice or cure period. Landlord will not be liable for any indirect, consequential, special or punitive damages incurred by Tenant arising from a claim that Landlord violated the bankruptcy code’s automatic stay in connection with any draw by Landlord of any Draw Proceeds, Landlord’s liability (if any) under such circumstances being limited to the reimbursement of direct costs as and to the extent expressly provided in this Paragraph 26(c). Nothing in this Lease or in the Letter of Credit will confer upon Tenant any property rights or

 

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interests in any Draw Proceeds; provided, however, that upon the expiration or earlier termination of this Lease, and so long as there then exist no Draw Events or Events of Default hereunder, Landlord agrees to return any remaining unapplied balance of the Draw Proceeds then held by Landlord to Tenant, and the Letter of Credit itself (if and to the extent not previously drawn in full) to the L/C Bank. Landlord may draw on the Letter of Credit and/or apply any Deposit in any order.

 

(d)                                  Applicable Definitions.

 

“Draw Event” means each of the following events:

 

(i)                                      the occurrence of any one or more of the following which shall have also been preceded, simultaneously accompanied, or succeeded by an Event of Default under this Lease regardless of the absence of any notice of default which might otherwise be required with respect to an Event of Default if the giving of notice to Tenant about such breach by Tenant is stayed or barred due to one of the following events: (1) Tenant’s filing of a petition under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, or Tenant’s making a general assignment or general arrangement for the benefit of creditors, (2) the filing of an involuntary petition under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, or the filing of a petition for adjudication of bankruptcy or for reorganization or rearrangement, by or against Tenant and such filing not being dismissed within sixty (60) days, (3) the entry of an order for relief under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, (4) the appointment of a “custodian,” as such term is defined in the Bankruptcy Code (or of an equivalent thereto under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted), for Tenant, or the appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease and possession not being restored to Tenant within sixty (60) days, or (5) the subjection of all or substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease to attachment, execution or other judicial seizure and such subjection not being discharged within sixty (60) days;

 

(ii)                                   the failure of Tenant, not less than thirty (30) days prior to the stated expiration date of the Letter of Credit then in effect, to cause an extension, renewal or replacement issuance of the Letter of Credit, to be effected, which extension, renewal or replacement issuance will be made by the L/C Bank, will otherwise meet all of the requirements of the initial Letter of Credit hereunder, which failure will be an Event of Default under this Lease;

 

(iii)                                the failure of Tenant to make when due any payment of Base Rent, of any monthly installment of any Additional Rent, or pay any other monetary obligation within three (3) business days after the amount is due; provided that in the event Tenant is entitled to a notice prior to the occurrence of an Event of Default for non-payment of Base Rent pursuant to Paragraph 18(a) this Draw Event shall not be deemed to have occurred until expiration of three (3) business days after that notice (or, if Landlord is prevented from giving notice by application of the bankruptcy code’s automatic stay, any failure of Tenant to make when due any payment of

 

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Base Rent, of any monthly installment of any Additional Rent, or to pay any other monetary obligation within five days after the amount is due).

 

(iv)                               the payment by Landlord of any sum to cure a failure by Tenant to comply with any non-monetary obligation hereunder which Tenant has not cured within thirty (30) days after notice thereof by Landlord (or, if Landlord is prevented from giving notice by application of the bankruptcy code’s automatic stay, the payment of Landlord of any sum to cure a failure by Tenant to comply with any non-monetary obligation hereunder that Tenant has not cured within thirty (30) days from the date of the breach).

 

“Draw Proceeds” means the proceeds of any draw or draws made by Landlord under the Letter of Credit, together with any and all interest accruing thereon.

 

“L/C Bank” means any United States bank which is approved by Landlord in Landlord’s sole discretion.

 

“Letter of Credit” means that certain one-year irrevocable letter of credit, in the Letter of Credit Required Amount, issued by the L/C Bank, as required under Paragraph 26(b) and, if applicable, as extended, renewed, replaced or modified from time to time in accordance with this Lease, which letter of credit will be transferable and in substantially the same form as attached Exhibit E . Without limiting any of Landlord’s rights or Tenant’s obligations under this Paragraph 26, it is agreed that Tenant shall have the right to fulfill the requirement of providing Landlord with a Letter of Credit by causing the L/C Bank to issue two (2) Letters of Credit whose sum equals in the Letter of Credit Required Amount, each of which Letters of Credit shall be in the required format and fulfill all requirements of this Paragraph 26.

 

(e)                                   Transfer of Letter of Credit .  The Letter of Credit shall not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant. Tenant acknowledges that Landlord has the right to transfer or mortgage its interest in the Premises and the Building and in this Lease and Tenant agrees that in the event of any such transfer or mortgage, Landlord shall have the right to transfer or assign the Letter of Credit and/or the Draw Proceeds to the transferee or mortgagee, and in such event, Tenant shall look solely to such transferee or mortgagee for return of the Letter of Credit and/or the Draw Proceeds so transferred. Tenant shall pay all fees and charges of the L/C Bank with respect to any transfer of the Letter of Credit. Tenant shall, within five (5) days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm Landlord’s transfer or assignment of the Letter of Credit and/or the Draw Proceeds to such transferee or mortgagee.

 

(f)                                    Letter of Credit is Not Security Deposit .  Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit, any renewal thereof or substitute therefor or the proceeds thereof be (i) deemed to be or treated as a “security deposit” within the meaning of California Civil Code Section 1950.7, (ii) subject to the terms of such Section 1950.7, or (iii) intended to serve as a “security deposit” within the meaning of such Section 1950.7. The parties hereto (A) recite that the Letter of Credit is not intended to serve as a security deposit and such Section 1950.7 and any and all other laws, rules and regulations applicable to security deposits in the commercial context (“Security Deposit Laws”) shall have no applicability or relevancy thereto and (B) waive any and all rights, duties and obligations

 

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either party may now or, in the future, will have relating to or arising from the Security Deposit Laws. Notwithstanding the foregoing, to the extent California Civil Code 1950.7 in any way: (1) is determined to be applicable to this Lease or the Letter of Credit (or any proceeds thereof); or (2) controls Landlord’s rights to draw on the Letter of Credit or apply the proceeds of the Letter of Credit to any amounts due under this Lease or any damages Landlord may suffer following termination of this Lease, then Tenant full and irrevocably waives the benefits and protections of Section 1950.7 of the California Civil Code, it being agreed that Landlord may recover from the Letter of Credit (or its proceeds) all of Landlord’s damages under this Lease and California law including, but not limited to, any damages accruing upon the termination of this Lease in accordance with this Lease and Section 1951.2 of the California Civil Code.

 

(g)                                   Substitute Letter of Credit .  In the event the L/C Bank is declared insolvent by the FDIC or is closed for any reason, Tenant shall immediately provide a substitute Letter of Credit meeting the requirements of this Paragraph 26 from another United States bank which is approved by Landlord in Landlord’s sole discretion.

 

27.                           [INTENTIONALLY OMITTED]

 

28.                           TENANT’S RIGHT OF FIRST NOTIFICATION

 

(a)                                  Landlord shall give Tenant a written notice (this Paragraph 28, the “Availability Notice”) from time to time when Landlord first determines that Other Space (as defined below) will become Available (as defined in this Paragraph 28). As used in this Paragraph 28, “Other Space” means all leasable space on the third (3 rd ) and fourth (4 th ) floors of the Building other than the Premises. As used herein, “Available” means that the space (i) is not part of the Premises, (ii) is not then subject to a lease, (iii) is not then subject to any rights of tenant to renew their lease or expand their premises as set forth in their lease, and (iv) was not subject to any negotiations between Landlord and a prospective tenant or an existing tenant.

 

(b)                                  Landlord is only obligated to give an Availability Notice once as to any specific Other Space; provided that if Landlord leases any Other Space after Tenant has received an Availability Notice and that space again becomes Available after the expiration of that lease, then Landlord shall again give Tenant an Availability Notice with respect to that Other Space after that space again becomes Available.

 

(c)                                   Tenant’s rights and Landlord’s obligations under this Paragraph 28 are expressly subject to and conditioned upon there not existing an Event of Default by Tenant under this Lease at the time of delivery of an Availability Notice.

 

(d)                                  It is understood and agreed that Tenant’s rights under this Paragraph 28 are personal to Tenant and not transferable. In the event of any assignment or subletting of the Premises or any part thereof, this expansion right shall automatically terminate and shall thereafter be null and void.

 

29.                                PERSONAL PROPERTY.

 

(a)                                  Landlord hereby leases to Tenant, and Tenant hereby hires from Landlord, the Personal Property listed on Exhibit F hereto, if any (the “Included Personal Property”).

 

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(b)                                  Tenant shall:

 

(1)                                  accept the Included Personal Property in its “as is” condition as of the date hereof, as the same may be affected by reasonable wear and tear after the date hereof,

 

(2)                                  insure the Included Personal Property against loss or damage by fire or other casualty (and all of the provisions of this Lease applicable to insurance required to be carried by Tenant shall be applicable thereto),

 

(3)                                  surrender the Included Personal Property to Landlord in the Premises upon the expiration or sooner termination of this Lease in the same condition as at the commencement of this Lease, as the same may be affected by reasonable wear and tear or damage by fire or other casualty; provided, however, that if the Included Personal Property shall have been damaged by fire or other casualty and not repaired or replaced then upon such expiration or sooner termination Tenant shall pay to Landlord the full replacement cost thereof.

 

(c)                                   No later than ten (10) days after the delivery of possession of each portion of the Premises to Tenant, representatives of Landlord and Tenant shall jointly walk through the applicable portion of the Premises to confirm the inventory on Exhibit F and make any revisions thereto necessary to conform it to the actual items located therein.

 

30.                                GUARANTY. Tenant will deliver to Landlord, concurrently with Tenant’s execution and delivery of this Lease, a guaranty agreement in the form attached as Exhibit G hereto duly executed by the Guarantor listed in the Summary of Lease Terms (such guaranty agreement being referred to as the “Guaranty”). Tenant acknowledges that Landlord would not enter into this Lease with Tenant on the terms contained herein without the credit support provided by the Guaranty. Tenant covenants and agrees to maintain the Guaranty in full force and effect at all times during the Term; provided that this duty shall not be required of any subtenant of all or a portion of the Premises, notwithstanding anything contained in Paragraph 12 of this Lease to the contrary. If, to Tenant’s actual knowledge, Guarantor becomes insolvent or otherwise unable to perform under its Guaranty, or if any event of default occurs under the Guaranty, Tenant will give Landlord prompt notice thereof. Tenant will take such actions as Landlord may request to obtain a cure of the Guaranty default and/or to replace such Guaranty with additional security satisfactory to Landlord (which may include, in Landlord’s discretion, additional guaranties, security deposits, letters of credit, or other security) sufficient to provide Landlord with credit enhancement for this Lease at least equivalent in value to that provided when the Lease was entered into by the parties.

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease as of the day and year first above written.

 

 

LANDLORD :

 

 

 

PRU/SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company

 

 

 

By

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, its Managing Member

 

 

 

 

By:

/s/ Kristin Paul

 

 

Its:

Kristin Paul

 

 

 

Vice President

 

 

 

 

 

TENANT :

 

 

 

INMOBI INC., a Delaware corporation

 

 

 

By:

/s/ Naveen Tawari

 

Its:

Naveen Tawari, CEO

 

 

 

 

By:

 

 

Its:

 

 

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EXHIBIT A-1

 

SUITES 310/410 PREMISES FLOOR PLAN

 

(See Attached)

 

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EXHIBIT A-1

 

 


 

EXHIBIT A-1

 

 


 

EXHIBIT A-2

 

SUITE 420 PREMISES FLOOR PLAN

 

(See Attached)

 

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EXHIBIT B

 

BUILDING RULES AND REGULATIONS

 

1.                                       Sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed by tenants or used by them for any purpose other than for ingress to and egress from their respective premises. The halls, passages, exits, entrances, elevators, escalators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, would be prejudicial to the safety, character, reputation and interests of the Building and its tenants.

 

2.                                       No sign, placard, picture, name, advertisement or notice, visible from the exterior of leased premises shall be inscribed, painted, affixed or otherwise displayed by any tenant either on its premises or any part of the Building without the prior written consent of Landlord, and Landlord shall have the right to remove any such sign, placard, picture, name, advertisement, or notice without notice to and at the expense of the tenant.

 

If Landlord shall have given such consent to any tenant at any time, whether before or after the execution of the Lease, such consent shall in no way operate as a waiver or release of any of the provisions hereof or of such Lease, and shall be deemed to relate only to the particular sign, placard, picture, name, advertisement or notice so consented to by Landlord and shall not be construed as dispensing with the necessity of obtaining the specific written consent of Landlord with respect to any other such sign, placard, picture, name, advertisement or notice.

 

No signs will be permitted on any entry door unless the door is glass. All glass door signs must be approved by Landlord. Signs or lettering shall be printed, painted, affixed or inscribed at the expense of the tenant by a person approved by Landlord.

 

3.                                       The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of tenants only, and Landlord reserves the right to exclude any other names therefrom. Landlord reserves the right to restrict the amount of directory space utilized by Tenant.

 

4.                                       No curtains, draperies, blinds, shutters, shades, screens or other coverings, hangings or decorations shall be attached to, hung or placed in, or used in connection with, any window on any premises without the prior written consent of Landlord. In any event, with the prior written consent of Landlord, all such items shall be installed inside of Landlord’s standard draperies and shall in no way be visible from the exterior of the Building. No articles shall be placed or kept on the window sills so as to be visible from the exterior of the Building.

 

5.                                       Landlord reserves the right to exclude from the Building between the hours of 7 P.M. and 7 A.M. and at all hours on Saturdays, Sundays and holidays all persons who do not present a pass to the Building signed by Landlord. Landlord will furnish passes to persons for whom any tenant requests the same in writing. Each tenant shall be responsible for all persons for whom it requests passes and shall be liable to Landlord for all acts of such persons.

 

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Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person.

 

During any invasion, mob, riot, public excitement or other circumstance rendering such action advisable in Landlord’s opinion, Landlord reserves the right to prevent access to the Building by closing the doors, or otherwise, for the safety of tenants and protection of the Building and property in the Building.

 

6.                                       No tenant shall employ any person or persons other than the janitor of Landlord for the purpose of cleaning the premises unless otherwise agreed to by Landlord in writing. Except with the written consent of Landlord, no person or persons other than those approved by Landlord shall be permitted to enter the Building for the purpose of cleaning the same. No tenant shall cause any unnecessary labor by reason of such tenant’s carelessness or indifference in the preservation of good order and cleanliness. Landlord shall in no way be responsible to any tenant for any loss of property on the premises, however occurring, or for any damage done to the property of any tenant by the janitor or any other employee or any other person. Janitorial service shall include ordinary dusting and cleaning by the janitor assigned to such work and shall not include beating or cleaning of carpets or rugs or moving of furniture or other special services. Janitorial service will not be furnished on nights when rooms are occupied after 9:30 p.m. Window cleaning shall be done only by Landlord, and at such intervals and such hours as Landlord shall deem appropriate.

 

7.                                       No tenant shall obtain for use upon its premises towel or other similar services, or accept barbering or bootblacking services in its premises, except from persons authorized by Landlord, and at hours and under regulations fixed by Landlord.

 

8.                                       Each tenant shall see that the doors of its premises are closed and securely locked and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before the tenant or its employees leave such premises, and that all utilities shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness the Tenant shall make good all injuries sustained by other tenants or occupants of the Building or Landlord. On multiple-tenancy floors all tenants shall keep the door or doors to the Building corridors closed at all times except for ingress and egress.

 

9.                                       No tenant shall alter any lock or install a new or additional lock or any bolt on any door of its premises without the prior written consent of Landlord. If Landlord shall give its consent, the tenant shall in each case furnish Landlord with a key for any such lock.

 

10.                                Landlord will furnish Tenant without charge two (2) keys to each door lock provided in the Premises by Landlord. Landlord may make a reasonable charge for any additional keys. Tenant shall not have any such keys copied or any keys made. Each tenant, upon the termination of the tenancy, shall deliver to Landlord all the keys of or to the Building, offices, rooms and toilet rooms that shall have been furnished to the Tenant or that the Tenant shall have had made. In the event of the loss of any keys so furnished by Landlord, Tenant shall pay Landlord therefor.

 

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11.                                The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein, and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it.

 

12.                                No tenant shall use or keep in its premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material or use any method of heating or air conditioning other than that supplied by Landlord.

 

13.                                No tenant shall use, keep or permit to be used or kept in its premises any foul or noxious gas or substance or permit or suffer such premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations or interfere in any way with other tenants or those having business therein. No animals or birds shall be brought or kept in or about any premises or the Building; provided that Tenant’s employees may bring dogs into the Building so long as the dogs and their owners meet and comply with the requirements of the rules and regulations therefor established from time-to-time by Landlord in Landlord’s sole and absolute discretion, including without limitation the requirement that the dog owner execute Landlord’s form of indemnification agreement each time it brings a dog into the Building.

 

14.                                No cooking shall be done or permitted by any tenant on its premises, except that the preparation of coffee, tea, hot chocolate and similar items for tenants and their employees shall be permitted, nor shall such premises be used for lodging.

 

15.                                Except with the prior written consent of Landlord, no tenant shall sell, or permit the sale, at retail of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on any premises, nor shall any tenant carry on, or permit or allow any employee or other person to carry on, the business of stenography, typewriting or any similar business in or from any premises for the service or accommodation of occupants of any other portion of the Building, nor shall the premises of any tenant be used for the storage of merchandise or for manufacturing of any kind, or the business of a public barber shop, beauty parlor, or any business or activity other than that specifically provided for in such tenant’s lease.

 

16.                                Landlord will direct electricians as to where and how telephone, telegraph and electrical wires are to be introduced or installed. No boring or cutting for wires will be allowed without the prior written consent of Landlord. The location of telephones, call boxes and other office equipment affixed to all premises shall be subject to the written approval of Landlord. All electrical appliances must be grounded and must meet UL Label Standards.

 

17.                                No tenant shall install any radio or television antenna, loudspeaker or any other device on the exterior walls or roof of the Building.

 

18.                                No tenant shall lay linoleum, tile, carpet or any other floor covering so that the same shall be affixed to the floor of its premises in any manner except as approved in writing by Landlord. The expense of repairing any damage resulting from a violation of this rule or the

 

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removal of any floor covering shall be borne by the tenant by whom, or by whose contractors, employees or invitees, the damage shall have been caused.

 

19.                                No furniture, freight, equipment, packages or merchandise shall be received in the Building or carried up or down the elevators, except between such hours, through such entrances and in such elevators as shall be designated by Landlord. Landlord reserves the right to require that moves be scheduled and carried out during non-business hours of the Building. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on wood strips of such thickness as is necessary to properly distribute the weight thereof. Landlord will not be responsible for loss of or damage to any such safe or property from any cause, and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of the tenant.

 

20.                                No tenant shall overload the floor of its premises or mark, or drive nails, screw or drill into, the partitions, woodwork or plaster or in any way deface such premises or any part thereof.

 

21.                                There shall not be used in any space, or in the public areas of the Building, either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards. No other vehicles of any kind shall be brought by any tenant into or kept in or about any premises in the Building.

 

22.                                Each tenant shall store all its trash and garbage within the interior of its premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the City of San Francisco without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate.

 

23.                                Tenant agrees not to employ any person, entity or contractor for any work in the Premises (including moving Tenant’s equipment and furnishings in, out of or around the Premises) whose presence may give rise to a labor or other disturbance in the Building, and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for the work.

 

24.                                Canvassing, soliciting, distribution of handbills and other written materials and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same.

 

25.                                Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name and address of the Building.

 

26.                                The requirements of tenants will be attended to only upon application at the office of the Building. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employee will admit any person (tenant or otherwise) to any office without specific instructions from Landlord.

 

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27.                                Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Building.

 

28.                                These Rules and Regulations may be changed from time to time, as Landlord may in good faith deem appropriate and necessary to the efficient, safe, and orderly operation of the Building and the Real Property, and are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants and conditions of the Lease.

 

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EXHIBIT C

 

TENANT WORK LETTER

 

This Tenant Work Letter (“Tenant Work Letter”) shall set forth the terms and conditions relating to the construction of the Premises. All references in this Tenant Work Letter to “the Lease” shall mean the relevant portions of the Lease to which this Tenant Work Letter is attached as Exhibit C .

 

SECTION 1

 

BASE, SHELL AND CORE

 

Landlord has previously constructed the base, shell, and core (i) of the Premises and (ii) of the floor(s) of the Building on which the Premises are located (collectively, the “Base, Shell, and Core”), and Tenant shall accept the Base, Shell and Core and the Premises and any other existing systems and improvement in the Premises in their current “As-Is” condition existing as of the date of the Lease and the Commencement Date. Tenant shall install in the Premises certain “Tenant Improvements” (as defined below) pursuant to the provisions of this Tenant Work Letter. Except for Landlord’s obligation to disburse the Tenant Improvement Allowance as described below, Landlord shall not be obligated to make or pay for any alterations or improvements to the Premises, the Building or the Real Property.

 

SECTION 2

 

TENANT IMPROVEMENTS

 

2.1                                Tenant Improvement Allowance . Tenant shall be entitled to a one-time tenant improvement allowance (the “Tenant Improvement Allowance”) in the amount of up to, but not exceeding $442,400.00, for costs relating to the design and construction of the improvements made pursuant to this Tenant Work Letter which are permanently affixed to or placed within the Premises (the “Tenant Improvements”); provided, however, that Landlord shall have no obligation to disburse all or any portion of the Tenant Improvement Allowance to Tenant unless Tenant makes a request for disbursement pursuant to the terms and conditions of Section 2.2 below prior to that date which the earlier of (a) the date is six (6) months after the completion of construction and (b) the date which is twelve (12) months after the Commencement Date. In no event shall Landlord be obligated to make disbursements to or on behalf of Tenant pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance. Tenant shall not be entitled to receive any cash payment or credit against Rent or otherwise for any unused portion of the Tenant Improvement Allowance which is not used to pay for the Tenant Improvement Allowance Items (as such term is defined below). Notwithstanding anything to the contrary this Tenant Work Letter, the portion of the Tenant Improvement Allowance disbursed for the Tenant Improvement Allowance Items described in Sections 2.2.1.1 and 2.2.1.8 shall not exceed in the aggregate $5.00 per rentable square foot of the Premises ( i.e ., up to $196,860.00 based on 39,372 rentable square feet in the Premises). In no event shall the Tenant Improvement Allowance be used for purposes of constructing

 

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improvements in the Premises for purposes of offering space for sublease or for the benefit of a subtenant.

 

2.2                                Disbursement of the Tenant Improvement Allowance .

 

2.2.1                      Tenant Improvement Allowance Items . Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord only for the following items and costs (collectively, the “Tenant Improvement Allowance Items”):

 

2.2.1.1            Payment of the fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Tenant Work Letter and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Tenant Work Letter;

 

2.2.1.2            The payment of plan check, permit and license fees relating to construction of the Tenant Improvements;

 

2.2.1.3            The cost of construction of the Tenant Improvements, including, without limitation, contractors’ fees and general conditions, testing and inspection costs, costs of utilities, trash removal, parking and hoists, and the costs of after-hours freight elevator usage.

 

2.2.1.4            The cost of any changes in the Base, Shell and Core work when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith;

 

2.2.1.5            The cost of any changes to the Construction Drawings or Tenant Improvements required by applicable laws and building codes (collectively, “Code”);

 

2.2.1.6            Sales and use taxes and Title 24 fees;

 

2.2.1.7            The “Coordination Fee,” as that term is defined in Section 4.2.2.2 of this Tenant Work Letter;

 

2.2.1.8            Cost of furniture, fixtures and equipment installed in the Premises; and

 

2.2.1.9            All other costs to be expended by Landlord in connection with the construction of the Tenant Improvements.

 

2.2.2                      Disbursement of Tenant Improvement Allowance . Subject to Section 2.1 above, during the construction of the Tenant Improvements, Landlord shall make monthly disbursements of the Tenant Improvement Allowance for Tenant Improvement Allowance Items for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant as follows:

 

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2.2.2.1            Monthly Disbursements . On or before the first (1 st ) day of each calendar month during the construction of the Tenant Improvements (or such other date as Landlord may designate), Tenant shall deliver to Landlord: (i) a request for payment of the “Contractor,” as that term is defined in Section 4.1 below, approved by Tenant, in a form to be provided by Landlord, showing the schedule, by trade, of percentage of completion of the Tenant Improvements in the Premises, detailing the portion of the work completed and the portion not completed, and demonstrating that the relationship between the cost of the work completed and the cost of the work to be completed complies with the terms of the “Construction Budget,” as that term is defined in Section 4.2.1 below; (ii) invoices from all of “Tenant’s Agents,” as that term is defined in Section 4.1.2 below, for labor rendered and materials delivered to the Premises; (iii) executed mechanic’s lien releases from all of Tenant’s Agents which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Section 3262(d); and (iv) all other information reasonably requested by Landlord. On or before the fifth (5 th ) day of the following calendar month, Landlord shall deliver a check to Tenant made jointly payable to Contractor and Tenant in payment of the lesser of (A) Landlord’s Percentage Share of the amounts so requested by Tenant, as set forth in this Section 2.2.2.1 , above, less a Landlord’s Percentage Share of ten percent (10%) retention (the aggregate amount of such retentions to be known as the “Final Retention”) and (B) the balance of any remaining available portion of the Tenant Improvement Allowance (not including the Final Retention), provided that Landlord does not dispute any request for payment based on non-compliance of any work with the “Approved Working Drawings”, as that term is defined in Section 3.4 below, or due to any substandard work, or for any other reason. For purposes of this Tenant Work Letter, “Landlord’s Percentage Share” shall be calculated by dividing the amount of the Tenant Improvement Allowance by the estimated budget for the Tenant Improvements (including any change orders) as prepared by Tenant and reasonably approved by Landlord from time to time, and shall in no event exceed one hundred percent (100%). Within twenty (20) days after Tenant’s delivery to Landlord of the items described in clauses (i) through (iv), Tenant shall pay the balance of the amounts requested by Tenant (less the remaining balance of the retention), and shall provide Landlord with written evidence of that payment. Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s payment request.

 

2.2.2.2            Final Retention . Subject to the provisions of this Tenant Work Letter, a check for the Final Retention payable jointly to Tenant and Contractor shall be delivered by Landlord to Tenant following the completion of construction of the Premises, provided that (i) Tenant delivers to Landlord properly executed mechanics lien releases in compliance with both California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4), and (ii) Landlord has determined that no substandard work exists which adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the structure or exterior appearance of the Building, or any other tenant’s use of such other tenant’s leased premises in the Building.

 

2.2.2.3            Other Terms . Landlord shall only be obligated to make disbursements from the Tenant Improvement Allowance to the extent costs are incurred by Tenant for Tenant Improvement Allowance Items.

 

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2.2.3                      Specifications for Building Standard Components . Landlord has established specifications (the “Specifications”) for the Building standard components to be used in the construction of the Tenant Improvements in the Premises which Specifications have been received by Tenant. Unless otherwise agreed to by Landlord, the Tenant Improvements shall comply with the Specifications. Landlord may make changes to the Specifications from time to time.

 

SECTION 3

 

CONSTRUCTION DRAWINGS

 

3.1                                Selection of Architect/Construction Drawings . Tenant shall retain the architect/space planner (the “Architect”) approved by Landlord, which approval shall not be unreasonably withheld, to prepare the Construction Drawings. Tenant shall retain the engineering consultants designated by Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.” All Construction Drawings shall comply with the drawing format and specifications reasonably determined by Landlord, and shall be subject to Landlord’s approval; provided that Landlord shall not unreasonably withhold its approval. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3 , shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings.

 

3.2                                Final Space Plan . Tenant shall supply Landlord with four (4) copies signed by Tenant of its final space plan for the Premises before any architectural working drawings or engineering drawings have been commenced. The final space plan (the “Final Space Plan”) shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein. Landlord may request clarification or more specific drawings for special use items not included in the Final Space Plan. Landlord shall advise Tenant within five (5) days after Landlord’s receipt of the Final Space Plan for the Premises if the same is unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall promptly (i) cause the Final Space Plan to be revised to correct any deficiencies or other matters Landlord may reasonably require, and (ii) deliver such revised Final Space Plan to Landlord.

 

3.3                                Final Working Drawings . After the Final Space Plan has been approved by Landlord and Tenant, Tenant shall promptly cause the Architect and the Engineers to

 

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complete the architectural and engineering drawings for the Premises, and cause the Architect to compile a fully coordinated set of architectural, structural, mechanical, electrical and plumbing working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits for the Tenant Improvements (collectively, the “Final Working Drawings”), and shall submit the same to Landlord for Landlord’s approval. Tenant shall supply Landlord with four (4) copies signed by Tenant of such Final Working Drawings. Landlord shall advise Tenant within five (5) days after Landlord’s receipt of the Final Working Drawings for the Premises if the same is unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall promptly (i) revise the Final Working Drawings in accordance with such review and any disapproval of Landlord in connection therewith, and (ii) deliver such revised Final Working Drawings to Landlord.

 

3.4                                Approved Working Drawings . The Final Working Drawings shall be approved by Landlord (the “Approved Working Drawings”) prior to the commencement of construction of the Premises by Tenant. After approval by Landlord of the Final Working Drawings, Tenant shall promptly submit the same to the appropriate governmental authorities for all applicable building permits. Tenant hereby agrees that neither Landlord nor Landlord’s consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Premises and that obtaining the same shall be Tenant’s responsibility; provided, however, that Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

 

3.5                                Design Problem . Notwithstanding anything to the contrary in this Tenant Work Letter, Landlord shall be deemed to have acted reasonably in disapproving plans or designs if Landlord determines in good faith that the matter disapproved constitutes or would create a Design Problem (as defined below). As used herein, a “Design Problem” shall mean (i) adverse effect on the structural integrity of the Building; (ii) possible damage to the Building’s systems; (iii) non-compliance with applicable codes; (iv) adverse effect on the exterior appearance of the Building; (v) creation of the potential for unusual expenses to be incurred upon the removal of the alteration or improvement and the restoration of the Premises upon termination of this Lease, unless Tenant agrees to pay for the incremental removal costs caused by the non-typical alterations; (vi) creation of the potential for unusual expenses to be incurred in connection with the maintenance by Landlord of the alteration or improvement, unless Tenant agrees to pay for the incremental maintenance costs caused by the non-typical alterations, or (vii) a material effect any other tenant or occupant of the Building.

 

SECTION 4

 

CONSTRUCTION OF THE TENANT IMPROVEMENTS

 

4.1                                Tenant’s Selection of Contractor and Tenant’s Agents.

 

4.1.1                      The Contractor . A general contractor shall be retained by Tenant to construct the Tenant Improvements. Such general contractor (“Contractor”) shall be selected

 

5



 

by Tenant from the following list of general contractors, and Tenant shall deliver to Landlord notice of its selection of the Contractor upon such selection: Principal and NOVO.

 

4.1.2                      Tenant’s Agents . All subcontractors, laborers, materialmen, and suppliers used by Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as “Tenant’s Agents”) must be approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed; provided that, in any event, Tenant must contract with Landlord’s base building subcontractors for any mechanical, electrical, plumbing, life safety, structural, heating, ventilation, and air-conditioning work in the Premises. If requested by Landlord, Tenant’s Agents shall all be union labor in compliance with the master labor agreements existing between trade unions and the local chapter of the Associated General Contractors of America.

 

4.2                                Construction of Tenant Improvements by Tenant’s Agents .

 

4.2.1                      Construction Contract . Prior to Tenant’s execution of the construction contract and general conditions with Contractor (the “Contract”), Tenant shall submit the Contract to Landlord for its approval, which approval shall not be unreasonably withheld or delayed. Prior to the commencement of the construction of the Tenant Improvements, and after Tenant has accepted all bids for the Tenant Improvements, Tenant shall provide Landlord with a written detailed cost breakdown by trade, of the final costs to be incurred, or which have been incurred, as set forth more particularly in Section 2.2.1.1 through 2.2.1.8 above, in connection with the design and construction of the Tenant Improvements to be performed by or at the direction of Tenant or the Contractor which costs form a basis for the amount of the Contract.

 

4.2.2                      Tenant’s Agents .

 

4.2.2.1            Landlord’s General Conditions for Tenant’s Agents and Tenant Improvement Work . Tenant’s and Tenant’s Agents’ construction of the Tenant Improvements shall comply with the following: (i) the Tenant Improvements shall be constructed in strict accordance with the Approved Working Drawings; (ii) Tenant and Tenant’s Agents shall not, in any way, interfere with, obstruct, or delay, the work of Landlord’s base building contractor and subcontractors with respect to the Base, Shell and Core or any other work in the Building; (iii) Tenant’s Agents shall submit schedules of all work relating to the Tenant’s Improvements to Contractor and Contractor shall, within five (5) business days of receipt thereof, inform Tenant’s Agents of any changes which are necessary thereto, and Tenant’s Agents shall adhere to such corrected schedule; and (iv) Tenant shall abide by all rules made by Landlord’s Building contractor or Landlord’s Building manager with respect to the use of freight, loading dock and service elevators, storage of materials, coordination of work with the contractors of other tenants, and any other matter in connection with this Tenant Work Letter, including, without limitation, the construction of the Tenant Improvements.

 

4.2.2.2            Coordination Fee . Tenant shall pay a logistical coordination fee (the “Coordination Fee”) to Landlord in an amount equal to the product of (i) five percent (5%), and (ii) the sum of the Tenant Improvement Allowance, the Over-Allowance Amount, as such amount may be increased hereunder, and any other amounts

 

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expended by Tenant in connection with the design and construction of the Tenant Improvements, which Coordination Fee shall be for services relating to the coordination of the construction of the Tenant Improvements.

 

4.2.2.3            Indemnity . Tenant’s indemnity of Landlord as set forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenant’s Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenant’s non-payment of any amount arising out of the Tenant Improvements and/or Tenant’s disapproval of all or any portion of any request for payment. Such indemnity by Tenant, as set forth in the Lease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Landlord’s performance of any ministerial acts reasonably necessary (i) to permit Tenant to complete the Tenant Improvements, and (ii) to enable Tenant to obtain any building permit or certificate of occupancy for the Premises.

 

4.2.2.4            Insurance Requirements .

 

4.2.2.4.1   General Coverages . All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenant as set forth in the Lease.

 

4.2.2.4.2   Special Coverages . Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of the Tenant Improvements, and such other insurance as Landlord may require, it being understood and agreed that the Tenant Improvements shall be insured by Tenant pursuant to the Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord, and in form and with companies as are required to be carried by Tenant as set forth in the Lease.

 

4.2.2.4.3   General Terms . Certificates for all insurance carried pursuant to this Section 4.2.2.4 shall be delivered to Landlord before the commencement of construction of the Tenant Improvements and before the Contractor’s equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy will give Landlord thirty (30) days prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Tenant Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense. All policies carried under this Section 4.2.2.4 shall insure Landlord and Tenant, as their interests may appear, as well as Contractor and Tenant’s Agents, and shall name as additional insureds Landlord’s Property Manager, Landlord’s Asset Manager, and all mortgagees and ground lessors of the Building. All insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance as respects the owner and that any other insurance maintained by owner is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under Section 4.2.2.3 of this Tenant Work Letter.

 

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4.2.3       Governmental Compliance . The Tenant Improvements shall comply in all respects with the following: (i) the Code and other state, federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) building material manufacturer’s specifications.

 

4.2.4       Inspection by Landlord . Landlord shall have the right to inspect the Tenant Improvements at all times, provided however, that Landlord’s failure to inspect the Tenant Improvements shall in no event constitute a waiver of any of Landlord’s rights hereunder nor shall Landlord’s inspection of the Tenant Improvements constitute Landlord’s approval of the same. Should Landlord disapprove any portion of the Tenant Improvements, Landlord shall notify Tenant in writing of such disapproval and shall specify the items disapproved. Any defects or deviations in, and/or disapproval by Landlord of, the Tenant Improvements shall be rectified by Tenant at no expense to Landlord, provided however, that in the event Landlord determines that a defect or deviation exists or disapproves of any matter in connection with any portion of the Tenant Improvements and such defect, deviation or matter might adversely affect the mechanical, electrical, plumbing, heating, ventilating and air conditioning or life-safety systems of the Building, the structure or exterior appearance of the Building or any other tenant’s use of such other tenant’s leased premises, Landlord may, take such action as Landlord deems necessary, at Tenant’s expense and without incurring any liability on Landlord’s part, to correct any such defect, deviation and/or matter, including, without limitation, causing the cessation of performance of the construction of the Tenant Improvements until such time as the defect, deviation and/or matter is corrected to Landlord’s satisfaction.

 

4.2.5       Meetings . Commencing upon the execution of the Lease, Tenant shall hold weekly meetings at a reasonable time, with the Architect and the Contractor regarding the progress of the preparation of Construction Drawings and the construction of the Tenant Improvements, which meetings shall be held at the Building, and Landlord and/or its agents shall receive prior notice of, and shall have the right to participate in or attend, all such meetings, and, upon Landlord’s request, certain of Tenant’s Agents shall participate in or attend such meetings. In addition, if requested by Landlord, minutes shall be taken of all such meetings, a copy of which minutes shall be promptly delivered to Landlord. One such meeting each month shall include the review of Contractor’s current request for payment.

 

4.3          Notice of Completion; Copy of “As Built” Plans . Within ten (10) days after completion of construction of the Tenant Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the County in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At the conclusion of construction, (i) Tenant shall cause the Architect and Contractor (A) to update the Approved Working Drawings as necessary to reflect all changes made to the Approved Working Drawings during the course of construction, (B) to certify to the best of their knowledge that the “record-set” of as-built drawings are true and correct, which certification shall survive the expiration or termination of the Lease, (C) to deliver to Landlord two (2) sets of sepias of such as-built drawings within

 

8



 

ninety (90) days following issuance of a certificate of occupancy for the Premises, and (D) to deliver to Landlord a computer disk containing the Approved Working Drawings in AutoCAD format, and (ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Premises.

 

4.4          Coordination by Tenant’s Agents with Landlord . Upon Tenant’s delivery of the Contract to Landlord under Section 4.2.1 of this Tenant Work Letter, Tenant shall furnish Landlord with a schedule setting forth the projected date of the completion of the Tenant Improvements and showing the critical time deadlines for each phase, item or trade relating to the construction of the Tenant Improvements.

 

SECTION 5

 

MISCELLANEOUS

 

5.1          Tenant’s Representative . Tenant has designated Jason Schlutt as its sole representative with respect to the matters set forth in this Tenant Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.

 

5.2          Landlord’s Representative . Landlord has designated Jackie Holland as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.

 

5.3          Time of the Essence in This Tenant Work Letter . Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the document and approval thereof shall be repeated until the document is approved by Landlord; provided, however, that Landlord’s required response time for any re-submissions shall be reduced by two (2) days.

 

5.4          Tenant’s Lease Default . Notwithstanding any provision to the contrary contained in the Lease, if an Event of Default by Tenant under the Lease or a default by Tenant under this Tenant Work Letter has occurred at any time on or before the substantial completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, at law and/or in equity, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction of the Premises (in which case, Tenant shall be responsible for any delay in the substantial completion of the Premises caused by such work stoppage), and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease (in which case, Tenant shall be responsible for any delay in the substantial completion of the Premises caused by such inaction by Landlord). In addition, if the Lease is terminated prior to the Commencement Date, for any reason due to an Event of Default by Tenant under the Lease or a default under this Tenant Work Letter, in addition to any other remedies available to Landlord under the Lease, at law and/or in

 

9



 

equity, Tenant shall pay to Landlord, as Additional Rent under the Lease, within five (5) days of receipt of a statement therefor, any and all costs (if any) incurred by Landlord (including any portion of the Tenant Improvement Allowance disbursed by Landlord) and not reimbursed or otherwise paid by Tenant through the date of such termination in connection with the Tenant Improvements to the extent planned, installed and/or constructed as of such date of termination, including, but not limited to, any costs related to the removal of all or any portion of the Tenant Improvements and restoration costs related thereto.

 

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EXHIBIT D

 

COMMENCEMENT DATE MEMORANDUM

 

THIS MEMORANDUM is entered into as of                              ,       by and between PRU/SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company (“Landlord”), and INMOBI INC., a Delaware corporation (“Tenant”), with respect to that certain Office Lease dated as of                                    , 20   (the “Lease”) respecting certain premises (the “Premises”) located in the building known as 475 Brannan Street, San Francisco, California.

 

Pursuant to Paragraph 2(a) of the Lease, Landlord and Tenant hereby confirm and agree that the Commencement Date (as defined in the Lease) is                                       , 20   and that the Expiration Date (as defined in the Lease) is                                      , 20  .

 

This Memorandum supplements, and shall be a part of, the Lease.

 

IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Memorandum as of the day and year first above written.

 

 

LANDLORD :

 

 

 

PRU/SKS BRANNAN ASSOCIATES, LLC, a Delaware limited liability company

 

 

 

By

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, its Managing Member

 

 

 

 

 

By:

 

 

 

Its:

 

 

 

 

 

 

TENANT :

 

 

 

INMOBI INC., a Delaware corporation

 

 

 

 

By:

 

 

Its:

 

 

 

 

 

By:

 

 

Its:

 

 

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EXHIBIT E

 

FORM OF LETTER OF CREDIT

 

DATE:

 

BENEFICIARY:

 

PRU/SKS BRANNAN ASSOCIATES, LLC,

A DELAWARE LIMITED LIABILITY COMPANY

C/O THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

4 EMBARCADERO CENTER, 27 TH  FLOOR

SAN FRANCISCO, CA 94111

ATTN: PRISA II ASSET MANAGER

 

ISSUING BANK:

 

CITIBANK, N.A.

C/O ITS SERVICER, CITICORP NORTH AMERICA, INC.

3800 CITIBANK CENTER, BUILDING B, 3 RD  FLOOR

TAMPA, FL 33610

 

LETTER OF CREDIT NO.

 

LADIES AND GENTLEMEN:

 

BY ORDER OF OUR CLIENT,             (THE “APPLICANT”), WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. , IN YOUR FAVOR FOR AN AMOUNT NOT TO EXCEED IN AGGREGATE USD                           (AMOUNT IN WORDS AND 00/100 U.S. DOLLARS), EFFECTIVE IMMEDIATELY AND EXPIRING AT THE OFFICE OF OUR SERVICER, CITICORP NORTH AMERICA, INC. AT 3800 CITIBANK CENTER, BUILDING B, 3 RD  FLOOR, TAMPA, FLORIDA 33610 ATTN. STANDBY LETTER OF CREDIT UNIT OR SUCH OTHER OFFICE AS WE MAY ADVISE YOU FROM TIME TO TIME (THE “OFFICE”), ON MARCH 31, 2013, SUBJECT TO EXTENSION AS PROVIDED BELOW.

 

FUNDS ARE AVAILABLE AGAINST YOUR SIGHT DRAFT(S) DRAWN ON US, IN THE FORM OF ANNEX 1 ATTACHED HERETO, PURPORTEDLY SIGNED BY THE BENEFICIARY, PRESENTED TO THE OFFICE OF OUR SERVICER, CITICORP NORTH AMERICA, INC. AT 3800 CITIBANK CENTER, BUILDING B, 3RD FLOOR, TAMPA, FLORIDA 33610.

 

IN ADDITION, PRESENTATION OF SUCH DRAFT MAY ALSO BE MADE BY FAX TRANSMISSION TO FAX NO. 813-604-7187 OR SUCH OTHER FAX NUMBER IDENTIFIED BY CITIBANK IN A WRITTEN NOTICE TO YOU. TO THE EXTENT A PRESENTATION IS MADE BY FAX TRANSMISSION, YOU MUST (I) PROVIDE TELEPHONE NOTIFICATION THEREOF TO CITIBANK (PHONE NO. 866-945-6284)

 

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PRIOR TO OR SIMULTANEOUSLY WITH THE SENDING OF SUCH FAX TRANSMISSION AND (II) SEND THE ORIGINAL OF SUCH DRAFT TO CITIBANK BY OVERNIGHT COURIER, AT THE ADDRESS PROVIDED ABOVE FOR PRESENTATION OF DOCUMENTS, PROVIDED HOWEVER, THAT CITIBANK’S RECEIPT OF SUCH TELEPHONE NOTICE OR ORIGINAL DOCUMENTS SHALL NOT BE A CONDITION TO PAYMENT HEREUNDER.

 

PARTIAL DRAWINGS ARE PERMITTED UNDER THIS CREDIT.

 

DRAFTS PRESENTED PRIOR TO 10:00 A.M. NEW YORK CITY TIME ON ANY BUSINESS DAY SHALL BE PAID BY BANK CHECK OR WIRE TRANSFER, AT BENEFICIARY’S INSTRUCTION, ON THE SAME BUSINESS DAY. DRAFTS PRESENTED AFTER 10:00 A.M. NEW YORK CITY TIME ON ANY BUSINESS DAY SHALL BE PAID BY BANK CHECK OR WIRE TRANSFER, AT BENEFICIARY’S INSTRUCTION, BY CLOSE OF BUSINESS ON THE NEXT SUCCEEDING BUSINESS DAY.

 

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY EXTENDED, WITHOUT AMENDMENT, FOR ADDITIONAL PERIOD(S) OF ONE YEAR FROM THE EXPIRY DATE HEREOF, OR ANY FUTURE EXPIRATION DATE, BUT NOT BEYOND JUNE 30, 2017, UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO ANY EXPIRATION DATE WE NOTIFY YOU BY REGISTERED MAIL OR BY ANY OTHER RECEIPTED MEANS THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD, WHEREUPON YOU MAY DRAW FOR THE AVAILABLE AMOUNT UNDER THIS LETTER OF CREDIT BY MEANS OF YOUR SIGHT DRAFT(S), DRAWN ON US, MENTIONING OUR LETTER OF CREDIT NUMBER.

 

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT IS TRANSFERABLE AND MAY BE TRANSFERRED IN ITS ENTIRETY, BUT NOT IN PART, AND MAY BE SUCCESSIVELY TRANSFERRED BY YOU OR ANY TRANSFEREE HEREUNDER TO A SUCCESSOR TRANSFEREE(S). TRANSFER UNDER THIS LETTER OF CREDIT TO SUCH TRANSFEREE SHALL BE EFFECTED UPON PRESENTATION TO US OF THE ORIGINAL OF THIS LETTER OF CREDIT AND ANY AMENDMENTS HERETO ACCOMPANIED BY A REQUEST DESIGNATING THE TRANSFEREE IN THE FORM OF EXHIBIT “A” ATTACHED HERETO APPROPRIATELY COMPLETED.

 

ALL THE CHARGES, INCLUDING WITHOUT LIMITATION ANY TRANSFER FEE, SHALL BE ON ACCOUNT OF APPLICANT. ANY TRANSFER OF THIS LETTER OF CREDIT IS NOT CONTINGENT ON APPLICANT’S ABILITY TO PAY THE TRANSFER FEE OR SUCH CHARGES.

 

WE HEREBY AGREE TO HONOR EACH DRAFT DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT IF PRESENTED, AS SPECIFIED, AT OUR OFFICE ON OR BEFORE EXPIRATION DATE.SHOULD YOU HAVE OCCASION TO COMMUNICATE WITH US REGARDING THIS LETTER OF CREDIT, PLEASE DIRECT YOUR CORRESPONDENCE TO OUR OFFICE, MAKING SPECIFIC MENTION OF

 

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THE LETTER OF CREDIT NUMBER INDICATED ABOVE.

 

EXCEPT AS FAR AS OTHERWISE EXPRESSLY STATED HEREIN, THIS STANDBY LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (“ISP98”), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590, AND AS TO MATTERS NOT GOVERNED BY THE ISP98, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE U.S. FEDERAL LAW.

 

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ANNEX 1

 

(FORM OF SIGHT DRAFT)

 

DATE:

 

AGGREGATE AMOUNT: U.S. DOLLARS

 

TO: [NAME OF ISSUER]

 

AT SIGHT OF THIS DRAFT, PAY TO THE ORDER OF OURSELVES, THE AGGREGATE AMOUNT OF U.S. DOLLARS                                                                                  (INSERT                  DOLLAR AMOUNT IN WORDS)                                   DRAWN UNDER [NAME OF ISSUER] STANDBY IRREVOCABLE TRANSFERABLE LETTER OF CREDIT NO.                                DATED

 

 

 

[BENEFICIARY]

 

 

 

 

 

BY:

 

 

 

(SIGNATURE)

 

 

 

 

 

 

 

 

 

(PRINT NAME AND TITLE)

 

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Exhibit A

Request for Full Transfer

Relinquishing all Rights as Beneficiary

 

(This form is to be used when the Letter of Credit is to be Transferred in its entirety and, no substitution of invoices is involved and, no rights are to be retained by the undersigned Beneficiary. )

 

Citicorp North America Inc.,

Date:

As Servicer for Citibank, N.A.

 

3800 Citibank Center, Bldg. B, 3rd Fl.

 

Tampa, FL 33610

 

 

Re: L/C No.

 

Issued by: CITIBANK, N.A.

 

Citibank, N.A. Ref:

 

Gentlemen:

 

Receipt is acknowledged of the original instrument which you forwarded to us relative to the issuance of a Letter of Credit ( herein called the “Credit” ) bearing your reference number as above in favor of ourselves and/or Transferees and we hereby request you to transfer the said Letter of Credit, in its entirety, to:

 

 

whose address is

 

 

(Optional) Please advise Beneficiary through the below indicated Advising Bank:

 

 

We are returning the original instrument to you herewith in order that you may deliver it to the Transferees together with your customary letter of transfer.

 

It is understood that any amendments to the Letter of Credit which you may receive are to be advised by you directly to the Transferees and that the drafts and documents of the Transferees, if issued in accordance with the conditions of the Letter of Credit, are to be forwarded by you directly to the party for whose account the credit was opened (or any intermediary) without our intervention.

 

(continued on page 2 )

 

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Page 2 Request for Full Transfer Relinquishing all Rights as Beneficiary

 

 

Citibank, N.A . reference

 

WE UNDERSTAND THAT ALL THE CHARGES, INCLUDING WITHOUT LIMITATION ANY TRANSFER FEE, SHALL BE ON ACCOUNT OF APPLICANT. AS PROVIDED IN THE LETTER OF CREDIT, TRANSFER OF THE LETTER OF CREDIT IS NOT CONTINGENT ON APPLICANT’S ABILITY TO PAY THE TRANSFER FEE OR SUCH CHARGES.

 

 

SIGNATURE GUARANTEED

 

Sincerely yours,

 

 

 

The First Beneficiary’s signature(s) with title(s) conforms with that on file with us and such is/are authorized for the execution of this instrument.

 

 

 

 

 

 

 

 

 

 

 

(Name of Bank)

 

(Name of First Beneficiary)

 

 

 

 

 

 

(Bank Address)

 

(Telephone Number)

 

 

 

 

 

 

(City, State, Zip Code)

 

(Authorized Name and Title)

 

 

 

 

 

 

(Telephone Number)

 

(Authorized Signature)

 

 

 

 

 

 

(Authorized Name and Title)

 

(Authorized Name and Title)

 

 

( If applicable )

 

 

 

 

 

 

(Authorized Signature)

 

(Authorized Signature)

 

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EXHIBIT F

 

INCLUDED PERSONAL PROPERTY

 

Suites 310/410 Premises furniture inventory

 

Item No.

 

Description

 

Qty.

1

 

Two drawer pedestal filing cabinet

 

122

2

 

Three drawer pedestal filing cabinet

 

127

3

 

Private offices desks with built in returns

 

20

4

 

Workstations

 

121

5

 

Upright wood bookshelves

 

3

6

 

Conference tables — dark wood

 

6

7

 

Glass console table curved

 

1

8

 

Glass side table

 

1

9

 

4 drawer lateral file cabinet

 

2

10

 

2 drawer lateral file cabinet

 

1

11

 

3 shelf cabinet on wheels

 

15

12

 

3 drawer lateral file cabinet

 

8

13

 

Refrigerator

 

1

14

 

Dishwasher

 

1

15

 

Large square patio tables

 

3

16

 

Small square patio tables

 

4

17

 

Silver patio tables

 

4

18

 

Reception Desk 4th floor

 

1

 

Suite 420 Premises furniture inventory

 

Item No.

 

Description

 

Qty.

“A”

 

Round table

 

9

“B”

 

Under desk filing cabinet

 

95

“C”

 

Reception desk

 

1

“D”

 

Red guest side chairs

 

2

“E”

 

Private office

 

 

 

 

2 drawer file

 

1

 

 

4 foot grey table

 

1

“F”

 

Bar stools — silver & red

 

10

“G”

 

Brown & black conference table

 

1

“H”

 

Red conference table

 

1

“I”

 

Black leather conf. chairs

 

21

“J”

 

White side cabinet

 

1

“K”

 

Black coffee table

 

1

“L”

 

Brown rectangular table

 

2

“M”

 

Tan sofa set

 

1

“N”

 

Red/Brown sofa set

 

1

“O”

 

Red curved sofa set

 

1

 

1



 

“P”

 

Boxed coffee tables

 

2

“Q”

 

Orange sofa set

 

1

“R”

 

White square coffee table

 

1

“S”

 

Small corner table

 

1

“T”

 

Cubicles

 

122

“U”

 

Telecomm cabling and wiring

 

unknown

 

2



 

EXHIBIT G

 

FORM OF LEASE GUARANTY

 



 

LEASE GUARANTY

 

This Lease Guaranty (“Guaranty”), dated as of March 26, 2012, is executed by InMobi Pte Ltd, Singapore (“Guarantor”), in favor of PRU/SKS Brannan Associates, LLC, a Delaware limited liability company (“Landlord”), in conjunction with, and to induce Landlord to enter into, that certain Lease of even date herewith (the “Lease”) between INMOBI INC., a Delaware corporation (“Tenant”) and Landlord, pursuant to which Landlord is leasing to Tenant certain real property (the “Premises”) more particularly described in the Lease. Capitalized terms used and not otherwise defined in this Guaranty shall have the meanings set forth for them in the Lease.

 

In consideration of the foregoing, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:

 

1.              Guaranty of Tenant’s Obligations . Guarantor hereby unconditionally and irrevocably guarantees to Landlord (a) the prompt payment by Tenant of all rent, additional rent and other amounts from time to time owing to Landlord under the Lease, and (b) the prompt and diligent performance and observance of all other terms, conditions, obligations and provisions of the Lease by Tenant. The payment of all such amounts and the performance and observance of all such other obligations and provisions shall be collectively referred to herein as the “Tenant Obligations.” This Guaranty will apply to the Lease, any extension or renewal of the Lease, and any holdover term following the term of the Lease, or any such extension or renewal.

 

2.              Modification of Lease; Assignment and Subletting . It is specifically agreed and understood that the terms, covenants and conditions of the Lease may be altered, affected, modified, amended, compromised, released or otherwise changed by agreement between Landlord and Tenant, or by course of conduct and Guarantor does guaranty and promise to perform all of the Tenant Obligations of Tenant under the Lease as so altered, affected, modified, amended, compromised, released or changed and the Lease may be assigned by or with the consent of Landlord or any assignee of Landlord without consent or notice to Guarantor and that this Guaranty shall thereupon and thereafter guaranty the performance of the Tenant Obligations as so changed, modified, amended, compromised, released, altered or assigned. In addition, no subletting of all or any portion of Tenant’s interest in the Lease or the Premises shall impair or affect the continuing force of this Guaranty.

 

3.              Reletting the Premises . In the event that Tenant defaults under the Lease, Landlord may, but shall not be required to, take such action as Landlord deems appropriate to relet all or part of the Premises in order to reduce Landlord’s loss or any liability under the Lease or this Guaranty. Without limiting the generality of any other provision hereof, Guarantor shall reimburse Landlord within 10 business days following written demand from time to time for all expenses reasonably incurred by Landlord (including without limitation repair and improvement expenses, advertising fees and brokerage commissions) in connection with any such reletting of the Premises.

 

4.              Guarantor Waivers . Guarantor hereby waives, to the fullest extent allowed by law, all suretyship rights, defenses and other benefits to which it might otherwise be entitled (including without limitation any and all rights and defenses that may be available by reason of

 

1



 

California Civil Code Sections 2787 to 2855, inclusive). Without limiting the generality of the foregoing: (a) Landlord shall be entitled to proceed against Guarantor with respect to any unfulfilled Tenant Obligation regardless of whether Landlord has proceeded, is then proceeding, or intends to proceed, against Tenant or any other person with respect thereto; (b) Landlord shall not be required to furnish Guarantor with copies of any notices given or required to be given to Tenant under the Lease, including without limitation notices of default; (c) Guarantor’s liability for the Tenant Obligations shall not be affected, released, terminated, discharged or impaired by (i) the existence of any bankruptcy, insolvency, reorganization or similar proceeding with respect to Tenant or any other person, (ii) any exercise, non-exercise or delay or lack of diligence in the exercise of remedies by Landlord against Tenant or any other person (except to the extent that the same has resulted in the fulfillment of the applicable Tenant Obligation), (iii) any assignment or other transfer (voluntary or involuntary) of Tenant’s interests in the Lease, (iv) the rejection of the Lease in any bankruptcy proceeding with respect to Tenant, or any other release or discharge of Tenant in any bankruptcy, insolvency, reorganization or similar proceeding; (v) any amendment of the Lease; (vi) any change in the time, manner or place of payment, performance or observance of any of the Tenant Obligations; (vii) any waiver of, or any assertion or enforcement or failure or refusal to assert or enforce, or any consent or indulgence granted by Landlord with respect to a departure from, any term of the Lease, including without limitation the waiver of any default by Tenant, or the making of any other arrangement with, or the accepting of any compensation or settlement from, Tenant; provided that to the extent that Landlord provides Tenant with a written waiver of, or written agreement with respect to a consent or indulgence with respect to a departure from, any term of the Lease, the Tenant Obligations for which Guarantor is liable under the Guaranty shall be deemed modified to reflect the terms of such written waiver or agreement; (viii) any other guaranty now or hereafter executed by Guarantor or any other guarantor or the release of any other guarantor from liability for the payment, performance or observance of any of the Tenant Obligations, whether by operation of law or otherwise; or (ix) any defect in or invalidity of the Lease caused by Tenant; and (d) Guarantor hereby expressly waives (i) notice of acceptance of this Guaranty and of any change in the financial condition of Tenant, (ii) presentment, demand and protest, (iii) until such time as all defaulted Tenant Obligations are fulfilled, all right of subrogation with respect to any obligation of Tenant that is fulfilled by Guarantor hereunder, (iv) the right to trial by jury in any action or proceeding arising out of or with respect to this Guaranty or the interpretation, breach or enforcement hereof, (v) the right to interpose any setoff or counterclaim in any action or proceeding arising out of or with respect to this Guaranty, (vi) any right or claim of right to cause a marshaling of the assets of Tenant or to cause Landlord to apply to any Tenant Obligation any security deposit or to proceed against Tenant or any collateral or security held by Landlord at any time or in any particular order, and (vii) any and all defenses relating to Landlord’s failure to perfect a security interest in Tenant’s property and/or impairment of collateral. Guarantor subordinates any liability or indebtedness of Tenant held by Guarantor to the Tenant Obligations.

 

5.             No Release . This Guaranty shall not be released, modified or affected by failure or delay on the part of Landlord to enforce any of the rights or remedies of Landlord under the Lease, whether pursuant to the terms thereof or at law or in equity, or by any release of any person liable under the terms of the Lease other than Guarantor (including, without limitation, Tenant, or any other guarantor).

 

2



 

6.              Continuing Guaranty . Guarantor’s liability under this Guaranty shall continue until all rents due under the Lease have been paid in full in cash and until all of the other Tenant Obligations to Landlord have been satisfied, and shall not be reduced by virtue of any payment by Tenant of any amount due under the Lease except, subject to the last sentence of this Section 6, as to the payment made. If all or any portion of the Tenant Obligations under the Lease are paid or performed by Tenant, the obligations of Guarantor hereunder shall continue and remain in full force and effect in the event that all or any part of such payment(s) or performance(s) is avoided or recovered directly or indirectly from Landlord as a preference, fraudulent transfer or otherwise.

 

7.              Representations and Warranties of Guarantor . Guarantor warrants and represents to Landlord that Guarantor now has and will continue to have full and complete access to any and all information concerning the Lease, the value of the assets owned or to be acquired by Tenant, Tenant’s financial status and its ability to pay and perform the obligations owed to Landlord under the Lease. Guarantor further warrants and represents that Guarantor has reviewed and approved copies of the Lease and is fully informed of the remedies Landlord may pursue, with or without notice to Tenant, in the event of default under the Lease. So long as Guarantor’s obligations hereunder remain unsatisfied or owing to Landlord, Guarantor shall keep fully informed as to all aspects of Tenant’s financial condition and the performance of said obligations. Guarantor further represents and warrants to Landlord that as of the date hereof Guarantor has unencumbered assets to satisfy Guarantor’s liability under this Guaranty, and upon request by Landlord made not more often than once per year, shall update such representation and warranty in a writing delivered to Landlord within thirty (30) days of such request.

 

8.              Cure of Defaults . Guarantor hereby covenants and agrees with Landlord that if a default shall at any time occur in the payment of any sums due under the Lease by Tenant, or in the performance of any other obligation of Tenant under the Lease, Guarantor shall and will forthwith upon demand pay such sums and any arrears thereof, to Landlord in legal currency of the United States of America for payment of public and private debts, and take all other actions necessary to cure such default and perform such obligations of Tenant.

 

9.              Guaranty of Payment and Performance . The liability of Guarantor under this Guaranty is a guaranty of payment and performance and not of collectibility, and is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Lease or the pursuit by Landlord of any remedies which it now has or may hereafter have with respect thereto, at law, in equity or otherwise.

 

10.           Jurisdiction . All disputes with respect to this Guaranty, and all actions to enforce this Guaranty, may be adjudicated in the state courts of California or the federal court sitting in San Francisco, California, and Guarantor hereby irrevocably submits to the jurisdiction of such courts in any action relating to this Guaranty. To the fullest extent permitted by law, this submission to California jurisdiction shall be self-operative and no further instrument or action, other than service of process, shall be required to confer jurisdiction over Guarantor in any such court. Nothing in this paragraph shall be construed to limit the right of Landlord to serve process in any manner permitted by law, or to institute any action against Guarantor in the courts of other appropriate jurisdictions. Guarantor hereby irrevocably appoints and designates Tenant as

 

3



 

Guarantor’s duly authorized agent for service of legal process and agrees that service of such process upon such party shall constitute personal service of process upon Guarantor. In the event service is undeliverable because such agent moves or ceases to do business in the State of California, Guarantor shall, within ten (10) days after Landlord’s request, appoint a substitute agent in the State of California on its behalf and within such period notice Landlord of such appointment. If such substitute agent is not timely appointed, Landlord shall, in its sole discretion, have the right to designate a substitute agent upon five (5) days’ notice to Guarantor.

 

11.           Notices. All notices and other communications provided for in this Guaranty shall be in writing and be delivered to the appropriate party at its address as follows:

 

If to Guarantor:

 

 

 

 

475 Brannan Street, Suite 310

 

San Francisco, California

 

Attn: Lease Guaranty Notice - Important

 

 

 

InMobi Pte Ltd

 

20 CECIL ST 14-01 EQUITY PLAZA

 

SINGAPORE 049705

 

 

If to Landlord:

 

 

 

 

c/o The Prudential Insurance Company of America

 

4 Embarcadero Center, 27th Floor

 

San Francisco, CA 94111

 

Attn: PRISA II Asset Manager

 

 

 

c/o The Prudential Insurance Company of America

 

8 Campus Drive, 4th Floor

 

Parsippany, New Jersey 07054

 

Attn: Greg Shanklin, Esquire

 

 

 

c/o SKS Investments LLC

 

601 California Street, Suite 1310

 

San Francisco, CA 94108

 

Attn: Ms. Pamela Izzo

 

Addresses for notice may be changed from time to time by written notice to all other parties. All communications shall be effective when actually received; provided, however, that nonreceipt of any communication as the result of a change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication.

 

12.           Attorneys’ Fees . In the event that any litigation is commenced with respect to this Guaranty, the party prevailing in such litigation shall be entitled to recover, in addition to such other relief as may be granted, its reasonable costs and expenses, including without limitation

 

4



 

reasonable attorneys’ fees and court costs, whether or not taxable, as awarded by a court of competent jurisdiction.

 

13.           Authority . Guarantor represents and warrants to Landlord that: (a) the execution, delivery and performance of this Guaranty by Guarantor will not violate any provision of any law, regulation, order or decree of any governmental authority or of any court binding on Guarantor, or conflict with, result in a breach of or constitute a default under any provision of any instrument to which Guarantor is a party or which it or any of its property is bound, and will not result in the imposition or creation of any lien, charge or encumbrance on, or security interest in, any of its property pursuant to the provisions of any of the foregoing; and (b) this Guaranty has been duly executed and delivered by Guarantor and constitutes a legal, valid and binding obligation of Guarantor, enforceable against it in accordance with its terms, subject as to enforcement of rights and remedies to any applicable bankruptcy, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally and doctrines of equity affecting the availability of specific enforcement or other equitable remedies.

 

14.           Bankruptcy . The obligations of Guarantor under this Guaranty shall not be altered, limited or affected by any case, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Tenant or any defense which Tenant may have by reason of order, decree or decision of any court or administrative body resulting from any such case. Landlord shall have the sole right to accept or reject any plan on behalf of a Guarantor proposed in such case and to take any other action which Guarantor would be entitled to take, including, without limitation, the decision to file or not file a claim. Guarantor acknowledges and agrees that any payment which accrues with respect to Tenant’s obligations under the Lease (including, without limitation, the payment of rent) after the commencement of any such proceeding (or, if any such payment ceases to accrue by operation of law by reason of the commencement of such proceeding, such payment as should have accrued if said proceedings has not been commenced) shall be included in Guarantor’s obligations hereunder because it is the intention of the parties that said obligations should be determined without regard to any rule or law or order which may relieve Tenant of any of its obligations under the Lease. Guarantor hereby permits any trustee in bankruptcy, receivers, debtor-in-possession, assignee for the benefit of creditors or similar person to pay Landlord, or allow the claim of Landlord in respect of, any such payment accruing after the date on which such proceeding is commenced. Guarantor hereby assigns to Landlord Guarantor’s right to receive any payments from any trustee in bankruptcy, receiver, debtor-in-possession, assignee for the benefit of creditors or similar person by way of dividend, adequate protection payment or otherwise.

 

15.           Estoppel Certificate . Landlord, by its acceptance of this Guaranty, and Guarantor agree that (a) each will, from time to time, within 10 business days following request by the other (the “Requesting Party”), execute and deliver to the Requesting Party a statement certifying that this Guaranty is unmodified and in full force and effect (or if modified, that it is in full force and effect as modified and stating such modifications), and (b) such certificates may be relied upon by anyone holding or proposing to acquire from or through Landlord or Guarantor any interest in the premises of which the Premises are a part or by any mortgagee or prospective mortgagee of such premises or any interest therein or by any prospective assignee or subtenant of Tenant.

 

5


 

 

16.           Financial Statements .  Annually during the Term of the Lease, promptly following Landlord’s request, Guarantor shall provide to Landlord financial statements which will include a balance sheet, income statement, statement of changes in equity, statement of consolidated cash flows and such other financial information as Landlord may reasonably request. Non-audited financial statements shall be certified to Landlord and Landlord’s lender, if applicable, as being accurate and complete in all material respects (the “Certified Statements”). The Certified Statements shall be signed by an officer, authorized agent, partner or managing member of the Guarantor.

 

17.           Miscellaneous .  This Guaranty shall (a) remain in full force and effect until the payment, performance or observance in full of the Tenant Obligations and all other amounts payable under this Guaranty, (b) be binding upon Guarantor, its heirs, legal representatives, successors and assigns (whether this Guaranty is assigned voluntarily or by operation of law), and (c) inure to the benefit of and be enforceable by Landlord and its successors and assigns or by any person to whom Landlord’s interest in the Lease or any part thereof, including the rents, may be assigned, whether by way of mortgage or otherwise (including without limitation any purchaser at a judicial foreclosure sale or trustee’s sale or a holder of a deed in lieu of foreclosure). Wherever in this Guaranty reference is made to Landlord or Tenant, the same shall be deemed to refer also to the then heir, legal representative, successor or assign of Landlord or Tenant, respectively. No provision of this Guaranty that is held to be inoperative, unenforceable or otherwise invalid shall affect the remaining provisions, and to this end all provisions hereof shall be severable. No failure or delay on the part of Landlord to exercise any power, right or privilege under this Guaranty shall impair any such power, right or privilege or be construed to be a waiver of any default or any acquiescence therein, nor shall any single or partial exercise of such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. This Guaranty shall constitute the entire agreement between Guarantor and the Landlord with respect to the subject matter hereof. No provision of this Guaranty or right of Landlord hereunder may be waived nor may Guarantor be released from any obligation hereunder except by a writing duly executed by an authorized officer, director or trustee of Landlord. The liability of Guarantor and all rights, powers and remedies of Landlord hereunder and under any other agreement now or at any time after in force between Landlord and Guarantor relating to the Lease shall be cumulative and not alternative and such rights, powers and remedies shall be in addition to all rights, powers and remedies given to Landlord by law. In the event that more than one person or entity executes this Guaranty as Guarantor, (a) the term “Guarantor” shall mean each such person or entity, (b) the obligations of each Guarantor shall be joint, several and independent, and (c) this Guaranty shall be construed and enforced as though each Guarantor executed a separate guaranty on the terms set forth in this Guaranty. Time is of the essence of this Guaranty. This Guaranty shall be governed by the laws of the State of California.

 

6



 

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed as of the date first written above.

 

 

“Guarantor:”

 

 

 

InMobi Pte Ltd, Singapore

 

 

 

 

 

 

 

By:

/s/ Naveen Tewari

 

 

Naveen Tewari, CEO

 

 

[printed name and title]

 

7


 

EXHIBIT B to SUBLEASE

 

Subleased Premises

 

GRAPHIC

 

Exhibit B


 

EXHIBIT C to SUBLEASE

 

Commencement Agreement

 

Date

 

 

 

 

 

Subtenant

Invitae Corporation

 

Address

 

 

 

 

 

 

Re:                              Commencement Letter with respect to that certain Sublease dated as of the          day of                         , 2014, by and between INMOBI, INC., a Delaware corporation, as Sublandlord, and INVITAE CORPORATION, a Delaware corporation, as Subtenant, for 12,286 rentable square feet on the third (3 rd ) floor of the Building located at 475 Brannan Street, San Francisco, California.

 

Dear                                                   :

 

In accordance with the terms and conditions of the above referenced Sublease, Subtenant accepts possession of the Premises and agrees:

 

1.                                       The Commencement Date is                                          ;

 

2.                                       The Expiration Date is April 30, 2017.

 

Please acknowledge your acceptance of possession and agreement to the terms set forth above by signing all 3 counterparts of this Commencement Letter in the space provided and returning 2 fully executed counterparts to my attention.

 

Sincerely,

 

INMOBI INC.,

a Delaware corporation

 

 

 

 

Authorized Signatory

 

 

 

Agreed and Accepted:

 

 

Subtenant:

INVITAE CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

Exhibit C



 

EXHIBIT D to SUBLEASE

 

Included Personal Property

 

Subleased Premises furniture inventory:

 

1.               Desk Workstations (desk; blue chair; dividers & filing ped) – 52

 

2.               IKEA Desks – 25

 

3.               Filing Cabinets

 

·                   6 drawers – 3

 

4.               Book Cases

 

·                   Metal – 3

 

·                   Light Wood Tall – 1

 

·                   Short metal – 1

 

·                   Rolling Carts – 4

 

5.               Filing Cabinets Peds - 68

 

6.               Conference Room Tables

 

·                   Regular – 1

 

·                   Large – 2

 

7.               Chairs

 

·                   Braided Black – 4

 

·                   Braided Grey – 12

 

·                   Black Pods – 23

 

·                   Tall Back Mesh – 4

 

·                   Short Back Mesh – 14

 

·                   Black Leather – 18

 

·                   Grey Fabric – 3

 

·                   Black with silver handles – 3

 

8.               Cabinets

 

·                   Dark – 3

 

·                   2 drawer file cabinet – 1

 

1



 

9.               Tables

 

·                   IKEA Small Square dark – 6

 

·                   Round Conf Tables – 3

 

10.        Patio Furniture

 

·                   Tables (4 ppl) – 4

 

·                   Table (2 ppl) – 1

 

·                   Chairs – 17

 

11.        Other Items

 

·                   Green Bean Bag

 

·                   Big Red Chair

 

12.        Kitchen

 

·                   Kegarator - 1

 

·                   Refrigerators - 2

 

·                   Dishwashers - 2

 

Sublandlord and Subtenant each acknowledge that the furniture listed above is owned by Sublandlord. Subtenant shall have the right to remove or replace any of the furniture, provided Subtenant delivers written notice to Sublandlord of such request, so that Sublandlord can remove such furniture at its cost. Subtenant will have no right to dispose of items identified in the above list without the written consent of the Sublandlord.

 

2




Exhibit 21.1

 

LIST OF SUBSIDIARIES OF INVITAE CORPORATION

 

Subsidiary

 

Jurisdiction

 

 

 

Invitae International, Inc.

 

Delaware

 

 

 

Invitae Chile SpA

 

Santiago, Chile

 




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Exhibit 23.1


Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption "Experts" and to the use of our report dated November 6, 2014, in the Registration Statement (Form S-1) and related Prospectus of Invitae Corporation for the registration of shares of its common stock to be filed on or about January 9, 2015.

/s/ Ernst & Young LLP
Redwood City, California
January 7, 2015




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Consent of Independent Registered Public Accounting Firm