 



Exhibit 10.4
EMPLOYMENT AGREEMENT
          EMPLOYMENT AGREEMENT dated as of September 14th, 2007 between Sontra
Medical Corporation, a Minnesota corporation (“Company”), and Patrick Mooney
(“Executive”).
BACKGROUND
          Company and Durham Pharmaceuticals Acquisition Co., a wholly owned
subsidiary of Company, are parties to an Agreement and Plan of Merger and
Reorganization dated as of September 14th, 2007 (the “Merger Agreement”). It is
a condition precedent to the closing of the transactions contemplated by the
Merger Agreement that Company and Executive enter into this Agreement providing
for the employment of Executive by Company and certain other matters.
          Pursuant to the foregoing, Company desires to employ Executive, and
Executive desires to enter into the employ of Company, effective as of the
closing of the transactions contemplated by the Merger Agreement and on the
terms and conditions contained in this Agreement. If the closing of the
transactions contemplated by the Merger Agreement does not occur on or before
September 30, 2007, this Agreement shall become null and void.
          Executive will be substantially involved with Company’s operations and
management and will learn trade secrets and other confidential information
relating to Company and its customers; accordingly, the restrictive covenants
contained in Section 5 of this Agreement constitute essential elements hereof.
          NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
TERMS
SECTION 1. CAPACITY AND DUTIES
     1.1 Employment; Acceptance of Employment. Company hereby employs Executive
and Executive hereby accepts employment by Company for the period and upon the
terms and conditions hereinafter set forth.
     1.2 Capacity and Duties.
           (a) Executive shall initially serve as Chief Executive Officer of
Company. Executive shall perform such other duties and shall have such authority

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consistent with his position as may from time to time reasonably be specified by
the Board of Directors of Company. Executive shall report directly to the Board
of Directors.
          (b) Executive shall devote his full working time, energy, skill and
best efforts to the performance of his duties hereunder, in a manner that will
comply with Company’s rules and policies and will faithfully and diligently
further the business and interests of Company. Executive shall not be employed
by or participate or engage in or in any manner be a part of the management or
operation of any business enterprise other than Company without the prior
written consent, which consent may be granted or withheld in the sole
discretion, of the Board of Directors of Company.
SECTION 2. TERM OF EMPLOYMENT
     2.1 Term. The term of Executive’s employment hereunder shall be two years
commencing on the closing of the transactions contemplated by the Merger
Agreement, as further extended or unless sooner terminated in accordance with
the other provisions hereof (the “Term”). Except as hereinafter provided, on the
second anniversary of the commencement date and on each subsequent anniversary
thereof, the Term shall be automatically extended for one year unless either
party shall have given to the other party written notice of termination of this
Agreement at least 90 days prior to such anniversary. If written notice of
termination is given as provided above, Executive’s employment under this
Agreement shall terminate on the last day of the Term.
SECTION 3. COMPENSATION
     3.1 Basic Compensation. As compensation for Executive’s services during the
first 12 months of the Term, Company shall pay to Executive a salary at the
annual rate of $300,000, payable in periodic installments in accordance with
Company’s regular payroll practices in effect from time to time. For each
subsequent 12 month period of Executive’s employment hereunder, Executive’s
salary shall be in the amount of his initial annual salary with such increases,
if any, as may be established by the Board of Directors of Company. Executive’s
annual salary, as determined in accordance with this Section 3.1, is hereinafter
referred to as his “Base Salary.”
     3.2 Initial Bonus. In addition to the other amounts provided for in this
Section 3, Company shall make a one time cash payment of $145,000 to Executive
within five business days following the commencement of the Term, which amount
shall be applied toward applicable withholding tax obligations.
     3.3 Performance Bonus. In the sole discretion of the Board of Directors of
Company, Executive shall, following the completion of each fiscal year of
Company during the Term, be entitled to receive a performance bonus in
accordance with the policies and plans of Company in place from time to time
with respect to the payment of bonuses to executive officers.

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     3.4 Stock Options. Upon the execution and delivery of this Agreement by the
parties hereto, Company shall grant to Executive options to purchase 500,000
shares of Company’s Common Stock at an exercise price per share of $2.39, on the
terms and conditions set forth in the form of Nonqualified Stock Option
Agreement between Company and Executive attached hereto as Exhibit A.
     3.5 Employee Benefits. During the Term, Executive shall be entitled to
participate in such of Company’s employee benefit plans and benefit programs,
including medical benefit programs, as may from time to time be provided by
Company for its executive officers.
     3.6 Vacation. During the Term, Executive shall be entitled to a paid
vacation commensurate with vacations as may from time to time be provided by
Company for its executive officers.
     3.7 Expense Reimbursement. Company shall reimburse Executive for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with its regular reimbursement policies as in
effect from time to time.
SECTION 4. TERMINATION OF EMPLOYMENT
     4.1 Death of Executive. If Executive dies during the Term, Company shall
not thereafter be obligated to make any further payments hereunder other than
amounts (including salary, expense reimbursement, etc.) accrued as of the date
of Executive’s death. Executive’s spouse and dependents (if any) shall be
entitled for a period of 12 months after Executive’s death to continue to
receive medical benefits coverage at the Company’s expense if and to the extent
Company was paying for such benefits for Executive’s spouse and dependents at
the time of Executive’s death.
     4.2 Disability of Executive. If Executive is or has been materially unable
for any reason to perform his duties hereunder for a period of 90 consecutive
days, then the Board of Directors shall have the right to terminate Executive’s
employment upon 30 days’ prior written notice to Executive at any time during
the continuation of such inability; provided that if Executive is able to resume
his duties hereunder during such 30 day notice period, Executive shall not be
deemed to be disabled for purposes of this Section 4.2 and such notice of
termination shall be null and void. In the event Executive is terminated
pursuant to this Section 4.2, Company shall not thereafter be obligated to make
any further payments hereunder other than amounts (including salary, expense
reimbursement, etc.) accrued under this Agreement as of the date of such
termination; provided, however, that for a period of 12 months following such
termination, Executive shall be entitled to continue to receive medical benefits
coverage for Executive and Executive’s spouse and dependents (if any) at
Company’s expense if and to the extent Company was paying for such benefits at
the time of such termination.

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     4.3 Termination for Cause. Executive’s employment hereunder shall terminate
immediately upon notice that the Board of Directors of Company is terminating
Executive for Cause (as defined herein), in which event Company shall not
thereafter be obligated to make any further payments hereunder other than
amounts (including salary, expense reimbursement, etc.) accrued under this
Agreement as of the date of such termination. “Cause” shall mean the following:
               (i) fraud or dishonesty in connection with Executive’s employment
or theft, misappropriation or embezzlement of Company’s funds or property;
               (ii) conviction of any felony or crime involving fraud or
misrepresentation;
               (iii) material breach of Executive’s obligations under this
Agreement;
               (iv) willful violation of any express lawful direction or
requirement established by the Board of Directors of Company; or
               (v) use of alcohol or other drugs that interfere with the
performance by Executive of his duties, or use of any illegal drugs or
narcotics.
     4.4 Termination without Cause or for Good Reason.
          (a) If (1) Executive’s employment is terminated by Company for any
reason other than Cause or the death or disability of Executive, or
(2) Executive’s employment is terminated by Executive for Good Reason (as
defined herein):
               (i) Company shall pay Executive all amounts (including salary,
expense reimbursement, etc.) accrued under this Agreement as of the date of such
termination;
               (ii) Company shall continue to pay Executive all of the
compensation provided for in Section 3.1 during the remainder of the
then-current Term, but not less than 12 months;
               (iii) Company shall pay to Executive a lump sum cash payment
equal to the Bonus Amount (as defined herein);
               (iv) anything to the contrary in Section 3.4 above (or any other
agreement or document relating to stock grants or options) notwithstanding, all
stock grants and outstanding stock options granted to Executive shall become
immediately vested and exercisable on the date of such termination and shall
remain exercisable as provided therein; and

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               (v) Executive shall be entitled to continue to receive for the
remainder of the then-current Term, but not less than 12 months, medical
benefits coverage for Executive and Executive’s spouse and dependents (if any)
at the Company’s expense if and to the extent Company was paying for such
benefits at the time of such termination.
          (b) For purposes of this Agreement, “Bonus Amount” shall mean an
amount equal to the average of the performance bonuses paid to Executive with
respect to Company’s two most recent fiscal years.
          (c) Except for the provisions of this Section 4.4, Company shall have
no further obligation to Executive hereunder.
          (d) “Good Reason” shall mean the following:
               (i) material breach of Company’s obligations hereunder if such
breach is not remedied by Company within 15 days after receiving notice of such
violation from the Executive;
               (ii) any decrease in Executive’s salary as increased during the
Term (except for decreases that are in conjunction with decreases in executive
salaries generally); or
               (iii) any material reduction in Executive’s duties or authority.
          (e) Notwithstanding the foregoing, Company shall not be obligated to
make any payments under this Section 4.4 unless Executive has executed and
delivered to Company a further agreement, to be prepared at the time of
Executive’s termination of employment, that shall provide (i) an unconditional
release of all claims, charges, complaints and grievances, whether known or
unknown to Executive, against Company or any of its affiliates, through date of
Executive’s termination of employment; (ii) an obligation to maintain the
confidentiality of such agreement; and (iii) an obligation to indemnify Company
if Executive breaches such agreement.
     4.5 Change in Control.
          (a) If, during the Term, there should be a Change of Control (as
defined herein), anything to the contrary in Section 3.4 above (or any other
agreement or document relating to stock grants or options) notwithstanding, all
stock grants and outstanding stock options granted to Executive shall become
immediately vested and exercisable on the date of such termination and shall
remain exercisable as provided therein.
          (b) If, during the Term, there should be a Change of Control (as
defined herein), and within 3 months before or 12 months thereafter either
(i) Executive’s employment is terminated by the Company for any reason other
than Cause or the death

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or disability of Executive or (ii) Executive terminates his employment for Good
Reason, then Company shall, on or before Executive’s last day of full-time
employment hereunder, pay to Executive, in lieu of any other rights to cash
compensation he may have under this Agreement which have not accrued by such
date, a lump sum cash payment equal to two times (x) Executive’s then current
Base Salary and (y) the Bonus Amount. Notwithstanding the foregoing, Company
shall not be obligated to make any payments under this Section 4.5 unless
Executive has executed and delivered to Company a further agreement, to be
prepared at the time of Executive’s termination of employment, that shall
provide (i) an unconditional release of all claims, charges, complaints and
grievances, whether known or unknown to Executive, against Company or any of its
affiliates, through date of Executive’s termination of employment; (ii) an
obligation to maintain the confidentiality of such agreement; and (iii) an
obligation to indemnify Company if Executive breaches such agreement.
          (c) It is the intention of the parties that the payments under this
Section 4.5 shall not constitute “excess parachute payments” within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended. Accordingly,
notwithstanding anything in this Section 4.5 to the contrary, if any of the
amounts otherwise payable under this Section would constitute “excess parachute
payments,” or if the independent accountants acting as auditors for Company on
the date of the Change in Control determine that such payments may constitute
“excess parachute payments,” then the amounts otherwise payable under this
Section 4.5 shall be reduced to the maximum amounts that may be paid without any
such payments constituting, or potentially constituting, “excess parachute
payments.”
          (d) Following any termination of Executive’s employment under this
Section 4.5 after a Change in Control, Executive shall be entitled to continue
to receive for the remainder of the then-current Term, but not less than
12 months, medical benefits coverage for Executive and Executive’s spouse and
dependents (if any) at the Company’s expense if and to the extent Company was
paying for such benefits at the time of such termination.
          (e) Upon making the payments described in this Section 4.5, Company
shall have no further obligation to Executive under this Agreement.
          (f) A “Change in Control” of Company shall mean:
               (1) the acquisition by any person, entity or “group” required to
file a Schedule 13D or Schedule 14D-1 under the Securities Exchange Act of 1934
(the “1934 Act”) (excluding, for this purpose, Company, its subsidiaries, or any
employee benefit plan of Company or its subsidiaries which acquires ownership of
voting securities of Company) of beneficial ownership (within the meaning of
Rule 13d-3 under the 1934 Act) of 40% or more of either the then outstanding
shares of common stock or the combined voting power of Company’s then
outstanding voting securities entitled to vote generally in the election of
directors; provided that any such acquisition by any person, entity or “group”
that beneficially owns 20% or more of such outstanding common stock

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or voting securities as of the effective date of this Agreement shall not be
considered a Change of Control under this Agreement;
          (2) the election or appointment to the Board of Directors of Company,
or resignation of or removal from the Board, of directors with the result that
the individuals who immediately following the effective date hereof constitute
the Board (the “Incumbent Board”) no longer constitute at least a majority of
the Board, provided that any person who becomes a director subsequent to the
date hereof whose appointment, election, or nomination for election by Company’s
stockholders, was approved by (i) Executive (if a director) or (ii) a vote of at
least a majority of the Incumbent Board (other than an appointment, election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Company) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
          (3) consummation by the Company of: (i) a reorganization, merger or
consolidation by reason of which persons who were the stockholders of Company
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the combined voting power of the
reorganized, merged or consolidated company’s then outstanding voting securities
entitled to vote generally in the election of directors, or (ii) a liquidation
or dissolution of Company or the sale, transfer, lease or other disposition of
all or substantially all of the assets of Company (whether such assets are held
directly or indirectly), that is not, in each case, undertaken in connection
with any voluntary or involuntary bankruptcy proceedings involving the Company.
     4.6 Voluntary Termination. In the event Executive’s employment is
voluntarily terminated by Executive without Good Reason, Company shall not be
obligated to make any further payments to Executive under this Agreement other
than amounts (including salary, expense reimbursement, etc.) accrued as of the
date of Executive’s termination.
SECTION 5. RESTRICTIVE COVENANTS
     5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed
to Company and shall not, at any time during or after his employment by Company,
retain in writing, use, divulge, furnish, or make accessible to any person or
entity, without the express authorization of the Board of Directors, any trade
secret, private or confidential information or knowledge of Company obtained or
acquired by him while so employed. All computer software, address books,
rolodexes, business cards, telephone lists, customer lists, price lists,
contract forms, catalogs, books, records, files and know-how acquired while an
employee of Company are acknowledged to be the property of Company and shall not
be duplicated, removed from Company’s possession or premises or made use of
other than in pursuit of Company’s business and, upon termination of employment
for any reason, Executive shall deliver to Company, without further demand, all
copies thereof which are then in his possession or under his control.

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     5.2 Inventions and Improvements. Executive shall promptly communicate to
Company all ideas, discoveries, inventions and business opportunities which are
or may be useful to Company or its business. Executive acknowledges that all
such ideas, discoveries, inventions, and improvements which heretofore have been
or are hereafter made, conceived, or reduced to practice by him at any time
during his employment with Company and every item of knowledge relating to
Company’s business interests (including business opportunities) heretofore or
hereafter gained by him at any time during his employment with Company are the
property of Company, and Executive hereby irrevocably assigns all such ideas,
discoveries, inventions, improvements, and knowledge to Company for its sole use
and benefit, without additional compensation. The provisions of this Section 5.2
shall apply whether such ideas, discoveries, inventions, improvements or
knowledge were or are conceived, made or gained by him alone or with others,
whether during or after usual working hours, whether on or off the job, whether
applicable to matters directly or indirectly related to Company’s business
interests (including potential business interests), and whether or not within
the specific realm of his duties. Executive shall, upon request of Company, but
at no expense to Executive, at any time during or after his employment with
Company, sign all instruments and documents reasonably requested by Company and
otherwise cooperate with Company to protect its right to such ideas,
discoveries, inventions, improvements, and knowledge, including applying for,
obtaining, and enforcing patents and copyrights thereon in such countries as
Company shall determine.
     5.3 Injunctive and Other Relief. Executive acknowledges and agrees that the
covenants contained herein are fair and reasonable in light of the consideration
paid hereunder, and that damages alone shall not be an adequate remedy for any
breach by Executive of his covenants contained herein and accordingly expressly
agrees that, in addition to any other remedies which Company may have, Company
shall be entitled to injunctive or other equitable relief in any court of
competent jurisdiction for any breach or threatened breach of any such covenants
by Executive.
     5.4 Definition of “Company.” “Company” as used in Section 5 includes all
affiliates of Company.
SECTION 6. MISCELLANEOUS
     6.1 Prior Employment. Executive represents and warrants that his acceptance
of employment at Company and his execution of this Agreement has not breached,
and the performance of his duties hereunder will not breach, any obligation owed
by him to, or any agreement with, any prior employer or other person.
     6.2 Litigation. At the request of Company, Executive shall during and after
the Term render reasonable assistance to Company in connection with any
litigation or other proceeding involving the Company or any of its affiliates.
Company shall provide reasonable compensation to Executive for such assistance
rendered after the Term.

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     6.3 Assignment; Benefit. This Agreement shall not be assignable by
Executive, and shall be assignable by Company only to any person or entity which
may become a successor in interest (by purchase of assets or stock, or by
merger, or otherwise) to Company in the business or substantially all of the
business presently operated by it. Subject to the foregoing, this Agreement and
the rights and obligations set forth herein shall inure to the benefit of, and
be binding upon, the parties hereto and each of their respective permitted
successors, assigns, heirs, executors and administrators.
     6.4 Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by facsimile (confirmed by U.S. mail), receipt acknowledged,
addressed as set forth below or to such other person and/or at such other
address as may be furnished in writing by any party hereto to the other. Any
such notice shall be deemed to have been given as of the date received, in the
case of personal delivery, or on the date shown on the receipt or confirmation
therefor, in all other cases. Any and all service of process and any other
notice in any action, suit or proceeding shall be effective against any party if
given as provided in this Agreement; provided that nothing herein shall be
deemed to affect the right of any party to serve process in any other manner
permitted by law.

         
 
  (a)   If to Company:
 
       
 
      Sontra Medical Corporation
 
       10 Forge Parkway
 
      Franklin, Massachusetts 02038
 
      Attention: Chairman, Board of Directors
 
      Facsimile No.: +1-815-349-9251
 
       
 
  (b)   If to Executive:
 
       
 
      Patrick Mooney
 
       625 Clinton Avenue
 
      Haddonfield, New Jersey 08033

     6.5 Entire Agreement; Modification; Advice of Counsel.
          (a) This Agreement constitutes the entire agreement between the
parties hereto with respect to the matters contemplated herein and supersedes
all prior agreements and understandings with respect thereto. No amendment,
modification, or waiver of this Agreement shall be effective unless in writing.
Neither the failure nor any delay on the part of any party to exercise any right
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right or remedy preclude any other or further exercise
of the same or of any other right or remedy with respect to such occurrence or
with respect to any other occurrence.

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          (b) Executive acknowledges that he has been afforded an opportunity to
consult with his counsel with respect to this Agreement.
     6.6 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania and the federal laws of the United States of America, to the extent
applicable, without giving effect to otherwise applicable principles of
conflicts of law.
     6.7 Headings; Counterparts. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
the same Agreement.
     6.8 Further Assurances. Each of the parties hereto shall execute such
further instruments and take such additional actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.

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

                  SONTRA MEDICAL CORPORATION    
 
           
 
  By:   /s/ Harry G. Mitchell    
 
                Name: Harry G. Mitchell         Title: Interim Chief Executive
Officer and Chief                   Financial Officer    
 
                EXECUTIVE:    
 
                /s/ Patrick Mooney                        Patrick Mooney    

 



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SONTRA MEDICAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
          This NONQUALIFIED STOCK OPTION AGREEMENT (the “Option Agreement”),
dated as of the 14th day of September, 2007 (the “Grant Date”), is between
Sontra Medical Corporation, a Minnesota corporation (the “Company”), and Patrick
Mooney (the “Optionee”), an employee of the Company.
          WHEREAS, the Company desires to give the Optionee the opportunity to
purchase shares of common stock of the Company (“Common Stock”) as hereinafter
provided;
          NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto,
intending to be legally bound hereby, agree as follows:
          1. Grant of Option. The Company hereby grants to the Optionee the
right and option (the “Option”) to purchase all or any part of an aggregate of
500,000 shares of Common Stock. The Option is in all respects limited and
conditioned as hereinafter provided. It is intended that the Option granted
hereunder be a nonqualified stock option (“NQSO”) and not an incentive stock
option (“ISO”) as such term is defined in section 422 of the Internal Revenue
Code of 1986, as amended (the “Code”).
          2. Exercise Price. The exercise price of the shares of Common Stock
covered by this Option shall be $2.39 per share. It is the determination of the
Board of Directors of the Company (the “Board”) that on the Grant Date the
exercise price was not less than the greater of (i) 100% of the “Fair Market
Value,” or (ii) the par value of the Common Stock. The term “Fair Market Value”
for purposes of this Option Agreement means the closing price of a share of
Common Stock on the trading day before the Grant Date.
          3. Term. Except as otherwise provided in Paragraph 8 or Paragraph 11,
this Option shall expire on September 14, 2017 (the “Expiration Date”), which
date is not more than 10 years from the Grant Date. This Option shall not be
exercisable on or after the Expiration Date.
          4. Exercise of Option. The Optionee shall have the right to purchase
from the Company, on and after the following dates, the following number of
Shares:

 



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          Date Installment Becomes                Exercisable   Number of Option
Shares
Grant Date
  166,667 Shares
September 14, 2008
  166,667 Shares
September 14, 2009
  166,666 Shares

Once options become exercisable, they will remain exercisable until they are
exercised or until they terminate.
          5. Method of Exercising Option. Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by written notice to the
Company at its principal office, which is presently located at 10 Forge Parkway,
Franklin, Massachusetts 02038, Attn: Chief Executive Officer. Such notice (a
suggested form of which is attached hereto) shall state the election to exercise
the Option and the number of whole shares with respect to which it is being
exercised; shall be signed by the person or persons so exercising the Option;
shall, unless the Company otherwise notifies the Optionee, be accompanied by the
investment certificate referred to in Paragraph 6; and shall be accompanied by
payment of the full exercise price of such shares. Only full shares will be
issued.
          The exercise price shall be paid to the Company –
          (a) in cash, or by certified check, bank draft, or postal or express
money order;
          (b) through the delivery of shares of Common Stock which shall be
valued at their Fair Market Value on the date of exercise;
          (c) by having the Company withhold shares of Common Stock at their
Fair Market Value on the date of exercise;
          (d) by delivering a properly executed notice of exercise of the Option
to the Company and a broker, with irrevocable instructions to the broker
promptly to deliver to the Company the amount of sale or loan proceeds necessary
to pay the exercise price of the Option; or
          (e) in any combination of (a), (b), (c) or (d) above.
          In the event the exercise price is paid, in whole or in part, with
shares of Common Stock, the portion of the exercise price so paid shall be equal
to the Fair Market Value of the Common Stock surrendered on the date of
exercise.
          Upon receipt of notice of exercise and payment, the Company shall
deliver a certificate or certificates representing the shares with respect to
which the Option is so exercised. Such certificate(s) shall be registered in the
name of the person or persons so exercising the Option (or, if the Option is
exercised by the Optionee and if the Optionee so requests in the

 



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notice exercising the Option, shall be registered in the name of the Optionee
and the Optionee’s spouse, jointly, with right of survivorship) and shall be
delivered as provided above to, or upon the written order of, the person or
persons exercising the Option. In the event the Option is exercised by any
person or persons after the death or disability of the Optionee, the notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise the Option. All shares that are purchased upon the exercise of the
Option as provided herein shall be fully paid and non-assessable.
          6. Shares to be Purchased for Investment. Unless the Company has
theretofore notified the Optionee that a registration statement covering the
shares to be acquired upon the exercise of the Option has become effective under
the Securities Act of 1933, as amended (the “1933 Act”), and the Company has not
thereafter notified the Optionee that such registration statement is no longer
effective, it shall be a condition to any exercise of this Option that the
shares acquired upon such exercise be acquired for investment and not with a
view to distribution, and the person effecting such exercise shall submit to the
Company a certificate of such investment intent, together with such other
evidence supporting the same as the Company may request. The Company shall be
entitled to restrict the transferability of the shares issued upon any such
exercise to the extent necessary to avoid a risk of violation of the 1933 Act
(or of any rules or regulations promulgated thereunder), or of any state laws or
regulations. Such restrictions may, in the discretion of the Company, be noted
or set forth in full on the share certificates.
          7. Transferability of Option. This Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his or her
disability, by his or her guardian or legal representative.
          8. Termination of Service. If the Optionee’s service with the Company
is terminated for any reason prior to the Expiration Date, this Option may be
exercised, to the extent of the number of shares with respect to which the
Optionee could have exercised it on the date of such termination of service, or
to any greater extent permitted by the Company, by the Optionee at any time
prior to the earlier of (i) the Expiration Date, or (ii) three months after the
date of such termination of service.
          9. Withholding of Taxes. The obligation of the Company to deliver
shares of Common Stock upon the exercise of this Option shall be subject to
applicable federal, state and local tax withholding requirements. If the
exercise of the Option is subject to the withholding requirements of applicable
federal, state and/or local tax law, the Optionee, subject to such additional
withholding rules (the “Withholding Rules”) as shall be adopted by the Company,
may satisfy the withholding tax, in whole or in part, by electing to have the
Company withhold (or by returning to the Company) shares of Common Stock, which
shares shall be valued, for this purpose, at their Fair Market Value on the date
the amount attributable to the exercise of the Option is includable in income by
the Optionee under section 83 of the Code. Such election must be made in
compliance with and subject to the Withholding Rules, and the Company may limit
the number of withheld shares to the extent necessary to avoid adverse
accounting consequences.

 



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          10. Adjustment in Case of Changes in Common Stock. The maximum number
of shares with respect to which Options may be granted under this Agreement, and
the number of shares issuable upon the exercise of outstanding Options under
this Agreement (Paragraph 4), as well as the option price per share of such
outstanding Options (Paragraph 2), shall be adjusted, as may be deemed
appropriate by the Company, to reflect any stock dividend, stock split,
spin-off, share combination or similar change in the capitalization of the
Company. In the event any such change in capitalization cannot be reflected in a
straight mathematical adjustment of the number of shares issuable upon the
exercise of outstanding Options (and a straight mathematical adjustment of the
exercise price thereof), the Committee shall make such adjustments as are
appropriate to reflect most nearly such straight mathematical adjustment. Such
adjustments shall be made only as necessary to maintain the proportionate
interest of Optionees, and preserve, without exceeding, the value of Options.
          11. Certain Corporate Transactions. In the event of a corporate
transaction (such as, for example, a merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation), the surviving or
successor corporation shall assume each outstanding Option or substitute a new
option for each outstanding Option; provided, however, that, in the event of a
proposed corporate transaction, the Company may terminate all or a portion of
the outstanding Options, effective upon the closing of the corporate
transaction, if it determines that such termination is in the best interests of
the Company. If the Company decides so to terminate outstanding Options, the
Company shall give the Optionee not less than seven days’ notice prior to any
such termination, and any Option which is to be so terminated may be exercised
(if and only to the extent that it is then exercisable) up to, and including the
time of, such termination.
          Further, the Company, in its discretion, may accelerate, in whole or
in part, the date on which any or all Options become exercisable. The Company
also may, in its discretion, change the terms of any outstanding Option to
reflect any such corporate transaction.
          12. Governing Law. This Option Agreement shall be governed by the
applicable Code provisions to the maximum extent possible. Otherwise, the laws
of the State of Minnesota (without reference to the principles of conflict of
laws) shall govern the operation of, and the rights of the Optionee under, this
Option Agreement.
[Signature page follows]

 



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     IN WITNESS WHEREOF, the Company has caused this Nonqualified Stock Option
Agreement to be duly executed by its duly authorized officer and the Optionee
has hereunto set his hand and seal, all as of the day and year first above
written.

              SONTRA MEDICAL CORPORATION
 
       
 
  By:   /s/ Harry G. Mitchell
 
       
 
      Harry G. Mitchell
 
            /s/ Patrick Mooney           Optionee

 



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SONTRA MEDICAL CORPORATION
Notice of Exercise of Nonqualified Stock Option
     I hereby exercise the nonqualified stock option granted to me pursuant to
the Nonqualified Stock Option Agreement dated as of September 14, 2007 by Sontra
Medical Corporation (the “Company”), with respect to the following number of
shares of the Company’s common stock (“Shares”), par value $.01 per Share,
covered by said option:

                      Number of Shares to be purchased        
 
                  Exercise price per Share   $    
 
                    Total exercise price   $    
 
               
 
                                                 A.   Enclosed is cash or my
certified check, bank draft, or postal or express money order in the amount of
$                     in full/partial [circle one] payment for such Shares;
 
               
 
      and/or        
 
                                                 B.   Enclosed is/are
                     Share(s) with a total Fair Market Value of
$                     on the date hereof in full/partial [circle one] payment
for such Shares;
 
               
 
      and/or        
 
                                                 C.   Please withhold
                     Shares with a total Fair Market Value of
$                     on the date hereof in full/partial [circle one] payment
for such Shares;  
 
               
 
      and/or        
 
                                                 D.   I have provided notice to
                                         [insert name of broker], a broker, who
will render full/partial [circle one] payment for such Shares. [Optionee should
attach to the notice of exercise provided to such broker a copy of this Notice
of Exercise and irrevocable instructions to pay to the Company the full exercise
price for the number of Shares purchased in this method.]

 



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     Please have the certificate or certificates representing the purchased
Shares registered in the following name or
names*                                         and sent to:
                                                                           
     If the condition in Paragraph 6 (“Shares to be Purchased for Investment”)
of the Nonqualified Stock Option Agreement related to the Shares purchased
hereby is applicable, the undersigned hereby certifies that the Shares purchased
hereby are being acquired for investment and not with a view to the distribution
of such Shares.

                 
DATED:
               
 
 
 
     
 
Optionee’s Signature    

 

*   Certificates may be registered in the name of the Optionee alone or in the
joint names (with right of survivorship) of the Optionee and his or her spouse.

 
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