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Index to Financial Statements

As filed with the Securities and Exchange Commission on October 5, 2015

Registration No. 333-206940

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

To

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

ADESTO TECHNOLOGIES CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

Delaware   3674   16-1755067

(State or other jurisdiction of

incorporation or organization)

 

(Primary standard industrial

classification code number)

 

(I.R.S. employer

identification no.)

 

 

1250 Borregas Avenue

Sunnyvale, CA 94089

(408) 400-0578

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Narbeh Derhacobian

President and Chief Executive Officer

Adesto Technologies Corporation

1250 Borregas Avenue

Sunnyvale, CA 94089

(408) 400-0578

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Mark A. Leahy, Esq.

William L. Hughes, Esq.

Fenwick & West LLP

801 California Street

Mountain View, CA 94041

(650) 988-8500

 

Jorge del Calvo, Esq.

Stanton D. Wong, Esq.

Gabriella Lombardi, Esq.

Pillsbury Winthrop Shaw Pittman LLP

2550 Hanover Street

Palo Alto, CA 94304

(650) 233-4500

 

 

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

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 (the “Securities Act”), check the following box.   ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) 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.   ¨

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.   ¨

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.   ¨

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):

 

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

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered (1)

 

Proposed

Maximum

Offering Price

Per Share (2)

 

Proposed

Maximum
Aggregate

Offering Price (1)(2)

 

Amount of

Registration Fee (3)

Common stock, par value $0.0001 per share

  4,715,000   $12.00   $56,580,000   $6,473

 

 

(1) Includes 615,000 shares that the underwriters have the option to purchase.
(2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
(3) The registrant previously paid a $5,810 registration fee with the initial filing of this registration statement. In accordance with Rule 457(a), an additional registration fee of $663 is being paid in connection with this amendment to the registration statement.

 

 

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 that 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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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 we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, Dated October 5, 2015

PRELIMINARY PROSPECTUS

4,100,000 Shares

 

 

LOGO

Common Stock

 

 

This is the initial public offering of the common stock of Adesto Technologies Corporation. We are selling 4,100,000 shares of common stock.

Prior to this offering, there has been no public market for our common stock. The initial public offering price is expected to be between $10.00 and $12.00 per share. We have applied to list our common stock on the NASDAQ Global Market under the symbol “IOTS”.

 

 

We are an “emerging growth company” as defined under the federal securities laws. Investing in our common stock involves risks. See “ Risk Factors ” beginning on page 10.

 

     Price to
Public
     Underwriting
Discounts and
Commissions (1)
     Proceeds to
Adesto
 

Per share

   $                    $                    $                

Total

   $         $         $     

 

  (1) See the section titled “Underwriting” for a description of the compensation payable to the underwriters.

We have granted the underwriters the option to purchase up to an additional 615,000 shares of common stock to cover over-allotments at the initial public offering price less the underwriting discount and commissions. The underwriters may exercise their option at any time within 30 days from the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities regulators has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on                     , 2015.

 

 

 

Needham & Company    Oppenheimer & Co.

 

Roth Capital Partners

                    , 2015


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TABLE OF CONTENTS

 

     Page  

Prospectus Summary

     1   

Risk Factors

     10   

Special Note Regarding Forward-Looking Statements

     33   

Industry and Market Data

     34   

Use of Proceeds

     35   

Dividend Policy

     35   

Capitalization

     36   

Dilution

     38   

Selected Consolidated Financial and Other Data

     40   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     44   

Business

     65   

Management

     80   

Executive Compensation

     88   

Certain Relationships and Related Party Transactions

     97   

Principal Stockholders

     99   

Description of Capital Stock

     101   

Shares Eligible for Future Sale

     106   

Material United States Federal Income Tax Consequences to Non-U.S. Holders of Our Common Stock

     108   

Underwriting

     113   

Legal Matters

     116   

Experts

     116   

Where You Can Find Additional Information

     116   

Index to Consolidated Financial Statements

     F-1   

 

 

You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by or on behalf of us and delivered or made available to you. Neither we nor any of the underwriters have authorized anyone to provide you with additional or different information. We are offering to sell, 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 or a free writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Until                     , 2015 (25 days after commencement of this offering), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.

 

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PROSPECTUS SUMMARY

This summary highlights information contained in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our common stock. You should carefully consider, among other things, our consolidated financial statements and the related notes and the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

ADESTO TECHNOLOGIES CORPORATION

Overview

We are a leading provider of application-specific, feature-rich, ultra-low power non-volatile memory products. We optimize our non-volatile memory products for Internet of Things, or IoT, applications including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets. We combine our non-volatile memory design capabilities with proprietary intellectual property and differentiated technology platforms to deliver high-performance products that dramatically reduce the overall energy consumption of our customers’ systems and extend battery life. Our products feature embedded intelligence in a small form factor and high reliability. We believe that our ultra-low power and feature-rich non-volatile memory products will become a key hardware building block for billions of IoT edge devices operating on and connected to networks worldwide. Through December 31, 2014, we have shipped over 200 million units to more than 500 end customers, 59 of which are large multi-national companies.

Our non-volatile memory, or NVM, product families include DataFlash, Fusion Flash and Mavriq. Our DataFlash family of products is well-suited for data-logging applications, such as fitness trackers and sensors, and allows for system simplification. Our Fusion Flash family of products offers the ability to function at a wide range of voltages and battery charge levels, which extends the useful battery life of our customers’ systems. Our Mavriq family of products utilize our proprietary Conductive Bridging RAM, or CBRAM, technology and is ideally suited for applications that require high-performance while consuming 1/10th to 1/100th the energy of existing flash memory products. We believe the power and speed advantages of our products have enabled us to become a preferred NVM provider to customers demanding a combination of exceptional battery life, energy efficiency, reliability and low cost.

We sell our products directly to leading original equipment manufacturers and original design manufacturers, or OEMs and ODMs, respectively, that manufacture products for our end customers. In general, we work directly with our customers to have our NVM devices designed into and qualified for their products, which we refer to as design wins. The number of our design wins has grown from 32 in 2013 to 65 in 2014 and to 115 in the nine months ended September 30, 2015. Although we maintain direct sales, support and development relationships with our end customers, most of our products are sold to those end customers through distributors.

As of June 30, 2015, we had 84 employees, approximately 60% of whom are engaged in research and development. Our headquarters are located in Sunnyvale, California, with additional sales operations in the Americas, Europe, the Middle East and Africa, and Asia-Pacific regions. For the years ended December 31, 2013 and 2014, we recorded revenue of $49.7 million and $41.5 million, and a net loss of $8.2 million and $8.9 million, respectively. Our revenue decreased from $21.1 million during the six months ended June 30, 2014 to $20.3 million during the six months ended June 30, 2015 and our net loss decreased from $5.2 million to $4.0 million over that same period. In 2012, we purchased certain flash memory product assets from Atmel Corporation. Since the acquisition, we improved certain features of the acquired products, enhanced their capabilities for low-power IoT applications, accelerated development of other select products, and introduced our next-generation DataFlash and Fusion Flash products based on the acquired technology, which we refer to as our

 



 

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new products. Revenue from new products grew from $6.0 million in 2013 to $28.5 million in 2014, and we generated $18.6 million in revenue from new products during the six months ended June 30, 2015.

Industry Background

The proliferation of data gathering and processing devices across billions of interconnected nodes within the IoT ecosystem is driving the need for new ways to store and utilize that data while adhering to low-power and high-performance requirements. Commodity NVM is limited in its ability to address the design requirements of IoT applications, such as energy efficiency, high reliability and integrated functionality in a small form factor. Accordingly, we believe that the requirements of the IoT market create unique technological challenges, necessitating new and innovative features, architectures and core silicon technology platforms for NVM devices used in IoT nodes. Web-Feet Research estimates that the NVM segment represents a $1.7 billion market opportunity in 2015, growing to $2.7 billion by 2019, representing a 12% compound annual growth rate, or CAGR. This growth is largely driven by the demand for NVM in IoT devices, which is expected to grow from $0.7 billion in 2015 to $1.7 billion in 2019, representing a 25% CAGR.

Our Solutions

We provide innovative, application-specific products designed to address the requirements of emerging IoT applications, including low energy consumption, high reliability and embedded intelligence functions in a small form factor.

We offer three product families, DataFlash, Fusion Flash and Mavriq, which are manufactured using two technology platforms: industry-standard “floating gate” technology and our proprietary CBRAM technology. Our products have unique features and architectures and deliver the following system-level benefits to our customers:

 

    Extended battery life. We optimize our products to operate at a wide voltage range and in special low-power modes in order to save energy, which extends the battery’s operating life.

 

    Enhanced functionality and reliability. Our components improve storage efficiency by requiring fewer re-write cycles than standard commodity NVM devices. This results in further energy savings and enhanced reliability by extending the life of the systems’ components and reducing wear and tear through repetitive use.

 

    System simplification and lower total cost of ownership. We incorporate power management features in our NVM products, which allows customers to reduce the number of components included in and the overall footprint of their systems, thereby lowering the total cost of their systems.

Our Competitive Strengths

We believe the following attributes and capabilities provide us with several competitive advantages:

 

    Purpose-built memory solutions for specific applications, including IoT. Our application-specific products feature ultra-low energy consumption, an efficient, high-performance interface and a high level of integration. As such, they are a higher-performance solution than commodity NVM.

 

    Large, diversified and global customer base. In 2014, our products were sold to more than 500 end customers of varying sizes for use across multiple industry applications, including next-generation connected appliances, wearables, sensors and medical devices. More than 400 of our end customers purchased new products in 2014, including more than 100 that purchased both new and legacy products. Our end customers purchase our products directly from us or through distributors and, in 2014, approximately 54% of our revenue was generated from sales of our products to three independent, non-exclusive distributors. Our customer base provides us with an opportunity to earn more business through follow-on sales.

 



 

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    Close collaboration and relationships with customers and industry participants for future products. Through our collaborative relationships with customers, including leading OEMs and ODMs, we gain valuable insight into our customers’ product roadmaps and the design requirements of next-generation memory solutions to meet the needs of future products. These customer relationships enhance our ability to satisfy future customer requirements and to earn future design wins.

 

    Highly innovative CBRAM technology platform. Our innovative and differentiated CBRAM technology, which we believe is the first new memory process technology commercialized in the last 15 years, offers dramatic improvements in energy efficiency, performance and cost over floating gate NVM technology.

Our Strategy

Key elements of our strategy include:

 

    Maintain application-specific product design focus. We plan to continue to work closely with our customers’ system design, engineering and procurement groups to understand their requirements and create NVM feature sets that address the needs of their specific products and applications.

 

    Continue to build on design wins . We plan to continue to engage and build strong relationships with customers to obtain design wins. The number of our design wins has grown from 32 in 2013 to 65 in 2014 and to 115 in the nine months ended September 30, 2015, including 6, 63 and 109 design wins for new products, respectively. We also work with leading OEMs and ODMs to incorporate our application-specific NVM solutions into and qualify our products for their reference designs, which we refer to as reference design wins. We believe securing reference design wins is an effective way of increasing our presence in the end markets we serve because these designs may be used by many end customers across multiple applications.

 

    Achieve leadership position in our target markets through the continued release of new products optimized to address customer-specific requirements. Through the continued development and enhancement of our feature-rich NVM products and technologies designed to meet evolving customer requirements, we intend to achieve a leadership position in a broad range of vertical markets impacted by the emergence of IoT, such as wearables in the consumer market and sensors in the industrial market.

 

    Expand our manufacturing capabilities. We intend to scale our manufacturing capabilities by working with additional foundries that will allow us to support higher volumes, utilize advanced technologies and access a broader base of potential customers.

 

    Pursue CBRAM licensing opportunities. In addition to sales of our CBRAM-based products, we intend to monetize our proprietary CBRAM platform by licensing our technology to OEMs, ODMs, integrated device manufacturers, fabless semiconductor companies and foundries focused on embedding our technology in their current and future solutions.

Risk Factors

Our business is subject to numerous risks, including those described in the section titled “Risk Factors” immediately following this prospectus summary. Some of the more significant risks are:

 

    Our history of losses and that we may not be able to achieve or sustain profitability in the future.

 

    We have a limited operating history, which makes it difficult to evaluate our current business and future prospects.

 

    Our ability to accurately forecast customer demand and match production levels to customer orders.

 

    We rely on third parties to manufacture, package, assemble and test the semiconductor components comprising our products.

 



 

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    The market for our products is characterized by declines in average selling prices, which could negatively affect our revenue and margins.

 

    We began selling our flash memory products in 2012 and have not generated a material amount of revenue from our CBRAM-based products, which makes it difficult to evaluate our current and future prospects.

 

    Our growth depends on the growth and development of the emerging IoT industry, and if the market does not develop as we expect, our business prospects may be harmed.

 

    We rely on our relationships with OEMs and ODMs to enhance our product offerings and market position, and our failure to continue to develop or maintain such relationships in the future would harm our ability to remain competitive.

 

    We face competition and expect competition to increase in the future. If we fail to compete effectively, our revenue growth and results of operations will be materially adversely affected.

Corporate Information

We were originally incorporated in California in January 2006, and we plan to reincorporate into Delaware prior to the completion of this offering. Our principal executive offices are located at 1250 Borregas Avenue, Sunnyvale, California 94089 and our telephone number is (408) 400-0578. Our website is www.adestotech.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.

Unless otherwise indicated, the terms “Adesto,” “we,” “us” and “our” refer to Adesto Technologies Corporation, a Delaware corporation, together with its consolidated subsidiaries.

The Adesto design logo and the marks “Adesto,” “CBRAM,” “DataFlash,” and “Mavriq” are the property of Adesto Technologies Corporation. This prospectus contains additional trade names, trademarks, and service marks of other companies. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These provisions include:

 

    a requirement to have only two years of audited financial statements and only two years of related management’s discussion and analysis;

 

    an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting;

 

    an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

    reduced disclosure about our executive compensation arrangements; and

 

    exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or shareholder approval of any golden parachute arrangements.

We will remain an emerging growth company until the earliest to occur of: the last day of the first fiscal year in which we have more than $1.0 billion in annual revenue; the date we qualify as a “large accelerated filer,”

 



 

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with at least $700 million in market value of common equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering. We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. We are choosing to irrevocably “opt out” of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards, but we intend to take advantage of the other exemptions discussed above. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

 



 

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THE OFFERING

 

Common stock offered by us

4,100,000 shares

 

Common stock to be outstanding after this offering

13,944,621 shares

 

Over-allotment option of common stock offered by us

615,000 shares

 

Use of proceeds

We estimate that the net proceeds from the sale of shares of our common stock that we are selling in this offering will be approximately $39.4 million based upon an assumed initial public offering price of $11.00 per share, which is the midpoint of the offering 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.

 

  We expect to use the net proceeds that we receive from this offering for working capital and other general corporate purposes including repayment of debt. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, products, services, technologies or other assets. See “Use of Proceeds.”

 

Proposed NASDAQ symbol

“IOTS”

The number of shares of our common stock to be outstanding after this offering is based upon 9,678,880 shares of our common stock outstanding as of June 30, 2015 and 165,741 shares that we expect to issue upon the net exercise of warrants immediately prior to the completion of this offering that would otherwise expire, and excludes:

 

    744,855 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2015, with a weighted-average exercise price of $1.92 per share;

 

    55,395 shares of our common stock issuable upon the exercise of stock options granted after June 30, 2015, with an exercise price of $10.00 per share;

 

    886,629 shares of common stock issuable upon the vesting of restricted stock units, or RSUs, authorized to be granted as of the closing of this offering;

 

    411,499 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015, with a weighted-average exercise price of $24.72 per share; and

 

    2,017,243 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (1) 1,867,243 shares of common stock available for issuance under our 2007 Equity Incentive Plan as of June 30, 2015, which shares will be reserved under our 2015 Equity Incentive Plan, or the 2015 Plan, to the extent not granted prior to the completion of this offering, (2) 150,000 shares of common stock reserved for future issuance under our 2015 Employee Stock Purchase Plan, which will become effective in connection with this offering and contain provisions that automatically increase its share reserve each year, as more fully described in “Executive Compensation—Employee Benefit Plans.”

 



 

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Except as otherwise indicated, all information in this prospectus assumes:

 

    our reincorporation into Delaware prior to the completion of this offering;

 

    the effectiveness of our restated certificate of incorporation and our restated bylaws upon the closing of this offering;

 

    the automatic conversion of all shares of our convertible preferred stock outstanding as of June 30, 2015 into 9,114,739 shares of our common stock immediately upon the closing of this offering;

 

    the conversion of all outstanding warrants to purchase shares of convertible preferred stock into warrants to purchase 411,499 shares of common stock immediately upon the closing of this offering;

 

    a 1-for-33 reverse split of our outstanding capital stock effected on October 1, 2015;

 

    no exercise by the underwriters of their over-allotment option to purchase up to an additional 615,000 shares of our common stock from us; and

 

    no exercise of outstanding stock options or warrants subsequent to June 30, 2015, except for 165,741 shares that we expect to issue upon the net exercise of warrants immediately prior to the completion of this offering that would otherwise expire based upon an assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus.

 



 

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

We derived the summary consolidated statements of operations data for the years ended December 31, 2013 and 2014 and the consolidated balance sheet data as of December 31, 2014 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the unaudited summary consolidated statements of operations data for the six months ended June 30, 2014 and 2015 and the unaudited summary consolidated balance sheets data as of June 30, 2015 from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements were prepared on a basis consistent with our annual consolidated financial statements and, in the opinion of management, include all adjustments of a normal, recurring nature that are necessary for the fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results to be expected in the future, and our results for the six months ended June 30, 2015 are not necessarily indicative of the operating results to be expected for the full year ending December 31, 2015 or any other period. You should read the following summary consolidated financial and other data in conjunction with the section entitled “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.

 

       Year Ended December 31,     Six Months Ended
June 30,
 
       2013      2014     2014     2015  
      

(in thousands, except share and per share data)

 

Consolidated Statements of Operations Data:

           

Revenue

     $ 49,684       $ 41,465      $ 21,062      $ 20,290   

Cost of revenue (1)

       29,738         25,532        13,034        12,236   
    

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

       19,946         15,933        8,028        8,054   
    

 

 

    

 

 

   

 

 

   

 

 

 

Operating expenses: (1)

           

Research and development

       15,033         14,410        7,919        6,096   

Sales and marketing

       8,094         7,211        3,633        4,063   

General and administrative

       2,677         2,356        1,170        1,670   
    

 

 

    

 

 

   

 

 

   

 

 

 

Total operating expenses

       25,804         23,977        12,722        11,829   
    

 

 

    

 

 

   

 

 

   

 

 

 

Loss from operations

       (5,858      (8,044     (4,694     (3,775
    

 

 

    

 

 

   

 

 

   

 

 

 

Other income (expense):

           

Interest expense, net

       (2,731      (864     (422     (486

Other income (expense), net

       508         114        43        289   
    

 

 

    

 

 

   

 

 

   

 

 

 

Total other income (expense), net

       (2,223      (750     (379     (197
    

 

 

    

 

 

   

 

 

   

 

 

 

Loss before provision for income taxes

       (8,081      (8,794     (5,073     (3,972

Provision for income taxes

       72         140        110        71   
    

 

 

    

 

 

   

 

 

   

 

 

 

Net loss

     $ (8,153    $ (8,934   $ (5,183   $ (4,043
    

 

 

    

 

 

   

 

 

   

 

 

 

Net loss per share: (2)

           

Basic and diluted

     $ (15.14    $ (16.48   $ (9.61   $ (7.21
    

 

 

    

 

 

   

 

 

   

 

 

 

Weighted-average number of shares used in computing net loss per share: (2)

           

Basic and diluted

       538,388         542,245        539,228        560,694   
    

 

 

    

 

 

   

 

 

   

 

 

 

Pro forma net loss per share (unaudited): (2)

           

Basic and diluted

        $ (0.93     $ (0.42
       

 

 

     

 

 

 

Shares used in computing pro forma net loss per share (unaudited): (2)

           

Basic and diluted

          9,656,984          9,675,433   
       

 

 

     

 

 

 

 



 

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(1) Includes stock-based compensation expense as follows (in thousands):

 

     Year Ended December 31,      Six Months Ended
June 30,
 
           2013                  2014                  2014                  2015        

Cost of revenue

   $ 1       $ 4       $ 2       $ 3   

Research and development

     95         86         41         41   

Sales and marketing

     13         30         7         21   

General and administrative

     55         126         27         47   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 164       $ 246       $ 77       $ 112   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(2) See notes 1 and 12 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share and our pro forma net loss per share.

Key Metrics: (1)(2)

 

     Year Ended December 31,     Six Months Ended
June 30,
 
         2013             2014             2014             2015      
     (dollars in thousands)  

Non-GAAP gross margin

     42     43     43     39

Adjusted EBITDA

   $ 57      $ (2,912   $ (2,073   $ (2,079

 

(1) For information about our key metrics see “Selected Consolidated Financial and Other Data—Key Metrics.”
(2) Each of these measures is a non-GAAP financial measure. For more information regarding our use of these measures and a reconciliation of these measures to the most comparable GAAP measure, see “Selected Consolidated Financial and Other Data—Reconciliation of Non-GAAP Financial Measures.”

 

     As of June 30, 2015  
     Actual     Pro Forma (1)      Pro Forma as
Adjusted (2)
 
     (in thousands)  

Consolidated Balance Sheets Data:

  

Cash and cash equivalents

   $ 6,470      $ 6,470       $ 45,913   

Property and equipment, net

     1,059        1,059         1,059   

Total assets

     32,078        32,078         71,521   

Current liabilities (3)

     15,475        15,475         15,475   

Debt (3)

     14,133        14,133         14,133   

Preferred stock warrant liability

     903        —           —     

Convertible preferred stock

     78,467        —           —     

Total stockholders’ equity (deficit)

     (74,363     5,007         44,450   

 

(1) The pro forma column reflects (1) the conversion of all outstanding shares of our convertible preferred stock into 9,114,739 shares of our common stock immediately upon the closing of this offering and (2) the resulting reclassification of the preferred stock warrant liability to stockholders’ equity.
(2) The pro forma as adjusted column reflects the items described in footnote 1 and (1) the receipt of approximately $39.4 million in net proceeds from our sale of 4,100,000 shares of common stock in this offering at an assumed initial public offering price of $11.00 per share, which is the midpoint of the offering 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 and (2) the issuance of 165,741 shares of common stock that we expect to issue upon the net exercise of warrants that would expire if not exercised prior to the completion of this offering, based on the assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus. A $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share would increase or decrease our pro forma as adjusted cash and cash equivalents, total assets and total stockholders’ equity by $3.8 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(3) In April 2015 we entered into a three-year $15.0 million term loan facility. As of June 30, 2015, we had net borrowings of $15.0 million outstanding under our term loan facility, of which $4.0 million is included in current liabilities.

 



 

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RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below before making a decision to invest in our common stock. Our business, results of operations, financial condition or prospects could be materially and adversely affected by any of these risks and uncertainties, which could cause the trading price of our common stock to decline and you may lose all or part of your investment. In addition, the risks and uncertainties discussed below are not the only ones we face. Our business, results of operations, financial condition or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. In assessing the risks and uncertainties described below, you should also consider carefully the other information contained in this prospectus before making a decision to invest in our common stock.

Risk Factors Related to Our Business and Our Industry

We have a history of losses which may continue in the future, and we cannot be certain that we will achieve or sustain profitability.

We have incurred net losses since our inception. We incurred net losses of $8.2 million, $8.9 million and $4.0 million for the years ended December 31, 2013 and 2014 and the six months ended June 30, 2015, respectively. As of June 30, 2015, we had an accumulated deficit of $78.2 million. We expect to incur significant expenses related to the continued development and expansion of our business, including in connection with our efforts to pursue opportunities in emerging IoT markets, develop and improve upon our products and technology, maintain and enhance our research and development and sales and marketing activities and hire additional personnel. In addition, as a public company, we will incur significant additional legal, accounting and other expenses that we did not incur as a private company. We do not know whether our revenue will grow rapidly enough to absorb these costs, and our limited operating history makes it difficult to assess the extent of these expenses or their impact on our results of operations.

Further, revenue may not grow or revenue may decline for a number of possible reasons, many of which are outside our control, including a decline in demand for our products, increased competition, business conditions that adversely affect the semiconductor memory industry, including reduced demand for products in the end markets that we serve, or our failure to capitalize on growth opportunities. If we fail to generate sufficient revenue to support our operations, we may not be able to achieve or sustain profitability.

Our limited operating history makes it difficult to evaluate our current business and future prospects.

Although we have been in existence since 2006, our first full fiscal year of commercial shipments was 2013. Much of our growth has occurred since our acquisition of certain flash memory product assets of Atmel Corporation in September 2012. Since the acquisition, we have invested in developing and introducing new products based on the acquired products and technology. In 2013, we introduced the first of these next-generation NVM products and sales of these and other new products have experienced a high rate of growth. However, we may not be able to sustain the growth rate for sales of these products and our revenue could decline. We have also developed and enhanced our family of CBRAM-based products and shipped more than 1.0 million units through 2014, but revenue associated with these products has not been material to date.

Our limited operating history, and limited experience selling products, combined with the rapidly evolving and competitive nature of our markets, makes it difficult to evaluate our current business and future prospects. In addition, we have limited insight into emerging trends that may adversely affect our business, financial condition, results of operations and prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including unpredictable and volatile revenue and increased expenses as we continue to grow our business. The viability and demand for our products may be affected by many factors outside of our control, such as the factors affecting the growth of the

 

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IoT industry and changes in macroeconomic conditions. If we do not manage these risks and overcome these difficulties successfully, our business will suffer.

We may be unable to match production with customer demand for a variety of reasons including our inability to accurately forecast customer demand or the capacity constraints of contract manufacturers, which could adversely affect our operating results.

We make planning and spending decisions, including determining production levels, production schedules, component procurement commitments, personnel needs and other resource requirements, based on our estimates of product demand and customer requirements. Our products are typically purchased pursuant to individual purchase orders. While our customers may provide us with their demand forecasts, they are not contractually committed to buy any quantity of products beyond purchase orders. Furthermore, many of our customers may increase, decrease, cancel or delay purchase orders already in place without significant penalty. The short-term nature of commitments by our customers and the possibility of unexpected changes in demand for their products reduce our ability to accurately estimate future customer requirements. On occasion, customers may require rapid increases in production, which can strain our resources, necessitate more onerous procurement commitments and reduce our gross margin. If we overestimate customer demand, we may purchase products that we may not be able to sell, which could result in decreases in our prices or write-downs of unsold inventory. Conversely, if we underestimate customer demand or if sufficient manufacturing capacity was unavailable, we would lose sales opportunities and could lose market share or damage our customer relationships. The rapid pace of innovation in our industry could also render significant portions of our inventory obsolete. Excess or obsolete inventory levels could result in unexpected expenses or write-downs of inventory values that could adversely affect our business, operating results and financial condition.

We rely on third parties to manufacture, package, assemble and test the semiconductor components comprising our products, which exposes us to a number of risks, including reduced control over manufacturing and delivery timing and potential exposure to price fluctuations, which could result in a loss of revenue or reduced profitability.

As a fabless semiconductor company, we outsource the manufacturing, packaging, assembly and testing of our semiconductor components to third-party foundries and assembly and testing service providers. We use a single foundry, United Microelectronics Corporation in Taiwan, for the production of our flash memory products and a single foundry, Altis Semiconductor S.N.C. in France, for our Mavriq products. Our primary assembly and testing contractor in 2014 was Amkor Technology, Inc. in Taiwan, Korea and the Philippines. Our wafer probing is performed by King Yuan Electronics Co., Ltd. in Taiwan.

Relying on third-party manufacturing, assembly and testing presents a number of risks, including but not limited to:

 

    capacity and materials shortages during periods of high demand;

 

    reduced control over delivery schedules, inventories and quality;

 

    the unavailability of, or potential delays in obtaining access to, key process technologies;

 

    the inability to achieve required production or test capacity and acceptable yields on a timely basis;

 

    misappropriation of our intellectual property;

 

    the third parties’ ability to perform its obligations due to bankruptcy or other financial constraints;

 

    limited warranties on wafers or products supplied to us; and

 

    potential increases in prices.

Any of the foregoing risks may affect our ability to meet customer demand. For example, one of our silicon wafer suppliers suddenly declared bankruptcy in December 2013 and abruptly shut down its foundry. As a result,

 

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we were unable to fulfill a portion of our customers’ orders in 2014 while we transitioned wafer production to a new foundry. Based on the average selling prices then in effect for those wafers, we estimate that the potential loss of revenue exceeded $10.0 million.

We currently do not have long-term supply contracts with our third-party contract manufacturers for our DataFlash and Fusion Flash products, including United Microelectronics Corporation and Amkor Technology, Inc., and we typically negotiate pricing on a per-purchase order basis. Therefore, they are not obligated to perform services or supply components to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. During periods of high demand and tight inventories, our third-party foundries and assembly and testing contractors may allocate capacity to the production of other companies’ components while reducing deliveries to us, or significantly raise their prices. In particular, they may allocate capacity to other customers that are larger and better financed than us or that have long-term agreements, decreasing the capacity available to us. Shortages of capacity available to us may be caused by the actions of their other, large customers that may be difficult to predict, such as major product launches. If we need other foundries or assembly and test contractors because of increased demand, or if we are unable to obtain timely and adequate deliveries from our providers, we might not be able to cost-effectively and quickly retain other vendors to satisfy our requirements. Because the lead-time needed to establish a relationship with a new third-party supplier could be several quarters, there is no readily available alternative source of supply for any specific component. In addition, the time and expense to qualify a new foundry could result in additional expense, diversion of resources or lost sales, any of which would negatively impact our financial results.

In the event that we expand production of a component to include a new contract manufacturer, as we expect to do with our current and future CBRAM-based products, it may take approximately 18 to 24 months to allow a transition from our current foundry or assembly services provider to the new provider. We may experience difficulty migrating our proprietary CBRAM technology platform and, consequently, may experience reduced yields, delays in component deliveries and increased research and development expense. The inability by us or our third-party manufacturers to effectively and efficiently transition our technology to their infrastructure may adversely affect our operating results and our gross margin. There can be no assurance that we will be able to find suitable replacements for our third-party contract manufacturers.

If any of our current or future foundry partners or assembly and test subcontractors significantly increases the costs of wafers or other materials, interrupts or reduces our supply, including for reasons outside of their control, or if any of our relationships with our suppliers is terminated, our operating results could be adversely affected. Such occurrences could also damage our customer relationships, result in lost revenue, cause a loss in market share or damage our reputation.

The market for semiconductor memory products is characterized by declines in average selling prices, which we expect to continue, and which could negatively affect our revenue and margins.

Our customers expect the average selling price of our products to decrease year-over-year and we expect this trend to continue. When such pricing declines occur, we may not be able to mitigate the effects by selling more or higher margin units, or by reducing our manufacturing costs. In such circumstances, our operating results could be materially and adversely affected. Our legacy and new flash memory products have experienced declining average selling prices over their life cycle. The rate of decline may be affected by a number of factors, including relative supply and demand, the level of competition, production costs and technological changes. As a result of the decreasing average selling prices of our products following their launch, our ability to increase or maintain our margins depends on our ability to introduce new or enhanced products with higher average selling prices and to reduce our per-unit cost of sales and our operating costs. We may not be able to reduce our costs as rapidly as companies that operate their own manufacturing, assembly and testing facilities, and our costs may even increase because we do not operate our own manufacturing, assembly or testing facilities, which could also reduce our gross margins. In addition, our new or enhanced products may not be as successful or enjoy as high margins as we expect. If we are unable to offset any reductions in average selling prices by introducing new

 

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products with higher average selling prices or reducing our costs, our revenue and margins will be negatively affected and may decrease.

The semiconductor memory market is highly cyclical and has experienced severe downturns in the past, generally as a result of wide fluctuations in supply and demand, constant and rapid technological change, continuous new product introductions and price erosion. During downturns, periods of intense competition, or the presence of oversupply in the industry, the selling prices for our products may decline at a high rate over relatively short time periods as compared to historical rates of decline. We are unable to predict selling prices for any future periods and may experience unanticipated, sharp declines in selling prices for our products.

Our growth depends on the growth and development of the emerging IoT industry, and if the market does not develop as we expect, our business prospects may be harmed.

Our products are increasingly being utilized in IoT edge devices. The IoT industry is nascent and is characterized by rapidly changing technologies, devices and connectivity requirements, evolving industry standards and changing customer demands. The continued development of IoT depends in part on significant growth in the number of connected devices. Such growth is affected by various factors, including the continued growth in the use of mobile operator networks and the Internet to connect an increasing number and variety of devices, price reductions for key hardware and software components, innovation of other components of the IoT nodes toward low-power formats, and the continued development of IoT standards and protocols. Without these continued developments, IoT might not gain widespread market acceptance and our business could suffer. Security and privacy concerns, evolving business practices and consumer preferences may also slow the growth and development of IoT. Because our revenue growth ultimately depends upon the success of IoT, our business may suffer as a result of slowing or declining growth in IoT adoption. Even if the IoT industry does develop, we may not be well positioned or able to penetrate and capitalize on this new market. As a result of these factors, the future revenue and income potential of our business is uncertain.

The markets for our products are evolving, and changing market conditions, such as the introduction of new technologies or changes in customer preferences, may negatively affect demand for our products. If we fail to properly anticipate or respond to changing market conditions, our business prospects and results of operations will suffer.

The NVM industry is subject to constant and rapid changes in technology, frequent new product introductions, short product life cycles, rapid product obsolescence and evolving technical standards. New technologies may be introduced that make the current technologies on which our products are based less competitive or obsolete or require us to make changes to our technology that could be expensive and time consuming to implement. Due to the evolving nature of our markets, our future success depends on our ability to accurately anticipate and respond to changes in industry standards, technological requirements, customer and consumer preferences and other market conditions. Our technologies could become obsolete sooner than we expect because of faster than anticipated, or unanticipated, changes in one or more of the industry standards and technological requirements. We may be unable to develop and introduce new or enhanced technologies that satisfy customer requirements and achieve market acceptance in a timely manner or at all, succeed in commercializing the technologies on which we have focused our research and development expenditures to develop, and anticipate new industry standards and technological changes. If we fail to adapt successfully to technological changes or fail to obtain access to important new technologies, we may be unable to retain customers or attract new customers. Any decrease in demand for our products, or the need for low-power products in general, due to the emergence of competing technologies, changes in customer preferences and requirements or other factors, could adversely affect our business, results of operations and prospects.

 

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We must continuously develop new and enhanced products, and if we are unable to successfully market our new and enhanced products for which we incur significant expenses to develop, our results of operations and financial condition will be materially adversely affected.

In order to compete effectively in our markets, we must continually design, develop and introduce new and improved products with improved features in a cost-effective manner in response to changing technologies and market demand. This requires us to devote substantial financial and other resources to research and development. We are developing next-generation products, which we expect to be one of the drivers of our revenue growth in the future. However, we may not succeed in developing and marketing these new and enhanced products. We also face the risk that customers may not value or be willing to bear the cost of incorporating our new and enhanced products into their products, particularly if they believe their customers are satisfied with current solutions. Regardless of the improved features or superior performance of our new and enhanced products, customers may be unwilling to adopt our solutions due to design or pricing constraints, or because they do not want to rely on a single or limited supply source. Because of the extensive time and resources that we invest in developing new and enhanced products, if we are unable to sell customers new generations of our products, our revenue could decline and our business, financial condition, results of operations and cash flows would be negatively affected. For example, we generated limited revenue from sales of our Mavriq products to date. While we expect revenue from our Mavriq products to grow, we may not be able to materially increase our revenue from this product family. Similarly, any newly-introduced products or product families based on floating gate architecture may not achieve market acceptance and contribute significantly to our revenue. If we are unable to successfully develop and market our new and enhanced products that we have incurred significant expenses developing, our results of operations and financial condition will be materially and adversely affected.

Our success and future revenue depend on our ability to secure design wins and on our customers’ ability to successfully sell the products that incorporate our solutions. Securing design wins is a lengthy, expensive and competitive process, and may not result in actual orders and sales, which could cause our revenue to decline.

We sell to customers that incorporate our NVM into their products. A design win occurs after a customer has tested our product, verified that it meets the customer’s requirements and qualified our solutions for their products. Our customers may need several months to years to test, evaluate and adopt our product and additional time to begin volume production of the product that incorporates our solution. Due to this generally lengthy design cycle, we may experience significant delays from the time we increase our operating expenses and make investments in our products to the time that we generate revenue from sales of these products. Moreover, even if a customer selects our solution, we cannot guarantee that this will result in any sales of our products, as the customer may ultimately change or cancel its product plans, or efforts by our customer to market and sell its product may not be successful. We may not generate any revenue from design wins after incurring the associated costs, which would cause our business and operating results to suffer.

If a current or prospective customer designs a competitor’s solution into its product, it becomes significantly more difficult for us to sell our solutions to that customer because changing suppliers involves significant time, cost, effort and risk for the customer even if our solutions remain compatible with their product design. If current or prospective customers do not include our solutions in their products and we fail to achieve a sufficient number of design wins, our results of operations and business may be harmed.

We rely on our relationships with OEMs and ODMs to enhance our solutions and market position, and our failure to continue to develop or maintain such relationships in the future would harm our ability to remain competitive.

We develop our products for leading OEMs and ODMs that serve a variety of end markets and are developing devices for wearables, sensors, Bluetooth 4.0 and other IoT applications. For each application, manufacturers create products that incorporate specialized semiconductor technology, which makers of memory products use as the basis for their products. These manufacturers set the specifications for many of the key

 

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components to be used on each generation of their products and, in the case of memory components, generally qualify only a few vendors to provide memory components for their products. As each new generation of their products is released, vendors are validated in a similar fashion. We must work closely with semiconductor manufacturers to ensure our products become qualified for use in their products. As a result, maintaining close relationships with leading product manufacturers that are developing devices for wearables, Bluetooth 4.0 and other IoT applications is crucial to the long-term success of our business. We could lose these relationships for a variety of reasons, including our failure to qualify as a vendor, our failure to demonstrate the value of our new solutions, declines in product quality, or if OEMs or ODMs seek to work with vendors with broader product suites, greater production capacity or greater financial resources. If our relationships with key industry participants were to deteriorate or if our solutions were not qualified by our customers, our market position and revenue could be materially and adversely affected.

Changes to industry standards and technical requirements relevant to our products and markets could adversely affect our business, results of operations and prospects.

Our products are only a part of larger electronic systems. All products incorporated into these systems must comply with various industry standards and technical requirements created by regulatory bodies or industry participants in order to operate efficiently together. Industry standards and technical requirements in our markets are evolving and may change significantly over time. For our products, the industry standards are developed by the Joint Electron Device Engineering Council, an industry trade organization. In addition, large industry-leading semiconductor and electronics companies play a significant role in developing standards and technical requirements for the product ecosystems within which our products can be used. Our customers also may design certain specifications and other technical requirements specific to their products and solutions. These technical requirements may change as the customer introduces new or enhanced products and solutions.

Our ability to compete in the future will depend on our ability to identify and comply with evolving industry standards and technical requirements. The emergence of new industry standards and technical requirements could render our products incompatible with products developed by other suppliers or make it difficult for our products to meet the requirements of certain of our customers in consumer, industrial, IoT and other markets. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards and requirements. If our products are not in compliance with prevailing industry standards and technical requirements for a significant period of time, we could miss opportunities to achieve crucial design wins, our revenue may decline and we may incur significant expenses to redesign our products to meet the relevant standards, which could adversely affect our business, results of operations and prospects.

Our results of operations can fluctuate from period to period, which could cause our share price to fluctuate.

Our results of operations have fluctuated in the past and may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this prospectus:

 

    the receipt, reduction, delay or cancellation of orders by large customers;

 

    the gain or loss of significant customers and distributors;

 

    the timing and success of our launch of new or enhanced products and those of our competitors;

 

    market acceptance of our products and our customers’ products;

 

    the level of growth or decline in the IoT market;

 

    the timing and extent of research and development and sales and marketing expenditures;

 

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    the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

 

    changes in our product mix;

 

    our ability to reduce the manufacturing costs of our products;

 

    competitive pressures resulting in lower than expected average selling prices;

 

    fluctuations in sales by and inventory levels of OEMs and ODMs who incorporate our memory products in their products;

 

    cyclical and seasonal fluctuations in our markets;

 

    fluctuations in the manufacturing yields of our third-party contract manufacturers;

 

    events that impact the availability of production capacity at our third-party subcontractors and other interruptions in the supply chain including due to geopolitical events, natural disasters, materials shortages, bankruptcy or other causes;

 

    supply constraints for and changes in the cost of the other components incorporated into our customers’ products;

 

    the timing of expenses related to the acquisition of technologies or businesses;

 

    product rates of return or price concessions in excess of those expected or forecasted;

 

    costs associated with the repair and replacement of defective products;

 

    unexpected inventory write-downs or write-offs;

 

    costs associated with litigation over intellectual property rights and other litigation;

 

    the length and unpredictability of the purchasing and budgeting cycles of our customers;

 

    loss of key personnel or the inability to attract qualified engineers; and

 

    geopolitical events, such as war, threat of war or terrorist actions, or the occurrence of natural disasters.

The semiconductor memory industry is highly cyclical and our markets may experience significant cyclical fluctuations in demand as a result of changing economic conditions, budgeting and buying patterns of customers and others factors. As a result of these and other factors affecting demand for our products and our results of operations in any given period, the results of any prior quarterly or annual periods should not be relied upon as indicative of our future revenue or operating performance. Fluctuations in our revenue and operating results could also cause our stock price to decline.

If sales of our customers’ products decline or if their products do not achieve market acceptance, our business and operating results could be adversely affected.

Our revenue depends on our customers’ ability to commercialize their products successfully. The markets for our customers’ products are extremely competitive and are characterized by rapid technological change. Competition in our customers’ markets is based on a variety of factors including price, performance, product quality, marketing and distribution capability, customer support, name recognition and financial strength. As a result of rapid technological change, the markets for our customers’ products are characterized by frequent product introductions, short product life cycles, fluctuating demand and increasing product capabilities. As a result, our customers’ products may not achieve market success or may become obsolete. We cannot assure you that our customers will dedicate the resources necessary to promote and commercialize their products, successfully execute their business strategies for such products, or be able to manufacture such products in quantities sufficient to meet demand or cost-effectively manufacture products at a high volume. Our customers do not have contracts with us that require them to manufacture, distribute or sell any products. Moreover, our

 

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customers may develop internally, or in collaboration with our competitors, technology that they may utilize instead of the technology available to them through us. Our customers’ failure to achieve market success for their products, including as a result of general declines in our customers’ markets or industries, could negatively affect their willingness to utilize our products, which may result in a decrease in our revenue and negatively affect our business and operating results.

Our revenue also depends on the timely introduction, quality and market acceptance of our customers’ products that incorporate our solutions. Our customers’ products are often very complex and subject to design complexities that may result in design flaws, as well as potential defects, errors and bugs. We have in the past been subject to delays and project cancellations as a result of design flaws in the products developed by our customers. For example, in 2014 flaws in one of our customer’s products that were unrelated to our memory solutions generated negative publicity for our customer and delayed the product’s release until it could be redesigned. In the past, we have also been subject to delays and project cancellations as a result of changing market requirements, such as the customer adding a new feature, or because a customer’s product fails their end customer’s evaluation or field trial. Customer products may also be delayed due to issues with other vendors of theirs. We incur significant design and development costs in connection with designing our solutions for customers’ products. If our customers discover design flaws, defects, errors or bugs in their products, or if they experience changing market requirements, failed evaluations or field trials, or issues with other vendors, they may delay, change or cancel a project. If we have already incurred significant development costs, we may not be able to recoup those costs, which in turn would adversely affect our business and financial results.

We face competition and expect competition to increase in the future. If we fail to compete effectively, our revenue growth and results of operations will be materially and adversely affected.

The global semiconductor market in general, and the semiconductor memory market in particular, are highly competitive. We expect competition to increase and intensify as other semiconductor companies enter our markets, many of which have greater financial and other resources with which to pursue technology development, product design, manufacturing, marketing and sales and distribution of their products. Increased competition could result in price pressure, reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue and operating results. Currently, our competitors range from large, international companies offering a wide range of semiconductor products to companies specializing in other alternative, specialized emerging memory technologies. Our primary competitors include Atmel Corporation, Macronix International Co. Ltd., Microchip Technology Inc., Micron Technology, Inc., Spansion Inc. (recently acquired by Cypress Semiconductor Corporation), STMicroelectronics NV and Winbond Electronics Corp. In addition, as the IoT market opportunity grows, we expect new entrants will enter these markets and existing competitors, including leading semiconductor companies, may make significant investments to compete more effectively against our products. These competitors could develop technologies or architectures that make our products or technologies obsolete.

Our ability to compete successfully depends on factors both within and outside of our control, including:

 

    the functionality and performance of our products and those of our competitors;

 

    our relationships with our customers and other industry participants;

 

    prices of our products and prices of our competitors’ products;

 

    our ability to develop innovative products;

 

    our ability to retain high-level talent, including our management team and engineers; and

 

    the actions of our competitors, including merger and acquisition activity, launches of new products and other actions that could change the competitive landscape.

 

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Competition could result in pricing pressure, reduced revenue and profitability and loss of market share, any of which could materially and adversely affect our business, results of operations and prospects. In the event of a market downturn, competition in the markets in which we operate may intensify as our customers reduce their purchase orders. Our competitors that are significantly larger and have greater financial, technical, marketing, distribution, customer support and other resources or more established market recognition than us may be better positioned to accept lower prices and withstand adverse economic or market conditions.

Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer.

Prior to selecting and purchasing our products, our customers typically require that our products undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability. This qualification process may continue for several months or years. However, obtaining the requisite qualifications for a memory product does not assure any sales of the product. Even after successful qualification and sales of a product to a customer, a subsequent revision in our third-party contractors’ manufacturing process or our selection of a new contract manufacturer may require a new qualification process, which may result in delays and excess or obsolete inventory. After our products are qualified and selected, it can and often does take several months or more before the customer commences volume production of systems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, to qualify our products with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of those products may be precluded or delayed, which may impede our growth and harm our business.

Our costs may increase substantially if our third-party manufacturing contractors do not achieve satisfactory product yields or quality.

The fabrication process is extremely complicated and small changes in design, specifications or materials can result in material decreases in product yields or even the suspension of production. From time to time, the third-party foundries that we contract to manufacture our products may experience manufacturing defects and reduced manufacturing yields related to errors or problems in their manufacturing processes or the interrelationship of their processes with our designs. In some cases, our third-party foundries may not be able to detect these defects early in the fabrication process or determine the cause of such defects in a timely manner.

Generally, in pricing our products, we assume that manufacturing yields will continue to improve, even as the complexity of our products increases. Once our products are initially qualified with our third-party foundries, minimum acceptable yields are established. We are responsible for the costs of the units if the actual yield is above the minimum. If actual yields are below the minimum we are not required to purchase the units. Typically, minimum acceptable yields for our new products are generally lower at first and gradually improve as we achieve full production. Unacceptably low product yields or other product manufacturing problems could substantially increase overall production time and costs and adversely impact our operating results. Product yield losses will increase our costs and reduce our gross margin. In addition to significantly harming our results of operations and cash flow, poor yields may delay shipment of our products and harm our relationships with existing and potential customers.

The complexity of our products may lead to errors, defects and bugs, which could negatively impact our reputation with customers and result in liability.

Products as complex as ours may contain errors, defects and bugs when first introduced to customers or as new versions are released. Our products have in the past experienced such errors, defects and bugs. Delivery of products with production defects or reliability, quality or compatibility problems could significantly delay or hinder market acceptance of the products or result in a costly recall and could damage our reputation and

 

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adversely affect our ability to retain existing customers and attract new customers. Errors, defects or bugs could cause problems with the functionality of our products, resulting in interruptions, delays or cessation of sales of these products to our customers. We may also be required to make significant expenditures of capital and resources to resolve such problems. We cannot assure you that problems will not be found in new products, both before and after commencement of commercial production, despite testing by us, our suppliers or our customers. Any such problems could result in:

 

    delays in development, manufacture and roll-out of new products;

 

    additional development costs;

 

    loss of, or delays in, market acceptance;

 

    diversion of technical and other resources from our other development efforts;

 

    claims for damages by our customers or others against us; and

 

    loss of credibility with our current and prospective customers.

Any such event could have a material adverse effect on our business, financial condition and results of operations.

We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available from our third-party foundries. As a result, we periodically evaluate the benefits of migrating our solutions to other technologies in order to improve performance and reduce costs. These ongoing efforts require us from time to time to modify the manufacturing processes for our products and to redesign some products, which in turn may result in delays in product deliveries. We may face difficulties, delays and increased expense as we transition our products to new processes, and potentially to new foundries. We will depend on our third-party foundries as we transition to new processes. We cannot assure you that our third-party foundries will be able to effectively manage such transitions or that we will be able to maintain our relationship with our third-party foundries or develop relationships with new third-party foundries. If we or any of our third-party foundries experience significant delays in transitioning to new processes or fail to efficiently implement transitions, we could experience reduced manufacturing yields, delays in product deliveries and increased expenses, any of which could harm our relationships with our customers and our operating results.

As smaller line width geometry manufacturing processes become more prevalent, we intend to move our future products to increasingly smaller geometries in order to reduce costs while integrating greater levels of functionality into our products. This transition will require us and our third-party foundries to migrate to new designs and manufacturing processes for smaller geometry products. We may not be able to achieve smaller geometries with higher levels of design integration or to deliver new integrated products on a timely basis. We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies to reduce our costs and increase performance. We are dependent on our relationships with our third-party foundries to transition to smaller geometry processes successfully. We cannot assure you that our third-party foundries will be able to effectively manage any such transition. If we or our third-party foundries experience significant delays in any such transition or fail to implement a transition, our business, financial condition and results of operations could be materially harmed.

 

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If we fail to make necessary improvements to address a material weakness in our internal control over financial reporting identified by our independent registered public accounting firm, we may not be able to report our financial results accurately and timely or prevent fraud, any of which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the trading price of our common stock to decline.

Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements as of and for the years ended December 31, 2013 and 2014, our independent registered public accounting firm identified in their report to our audit committee that we had a material weakness in our internal control over financial reporting as of December 31, 2014 due to our lack of sufficient, qualified personnel in accounting and financial reporting functions with sufficient experience and expertise with respect to the application of GAAP and related financial reporting, which led to a delay in the closing of our books and resulted in a number of post-closing adjustments to our consolidated financial statements as of and for the years ended December 31, 2013 and 2014. A material weakness is defined in the standards established by the Public Company Accounting Oversight Board (United States) as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management and independent registered public accounting firm did not and were not required to perform an evaluation of our internal control over financial reporting as of and for the years ended December 31, 2013 and 2014 in accordance with the provisions of the JOBS Act.

We are in the process of taking steps intended to remedy this material weakness, and we will not be able to fully address this material weakness until these steps have been completed. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting” for information regarding our remediation efforts. If we fail to further increase and maintain the number and expertise of our staff for our accounting and finance functions and to improve and maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, we may be unable to report our financial results accurately and prevent fraud. In addition, we cannot be certain that any such steps we undertake will successfully remediate the material weakness or that other material weaknesses and control deficiencies will not be discovered in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause our stock price to decline. As a result of such failures, we could also become subject to investigations by the NASDAQ Stock Market, the U.S. Securities and Exchange Commission, or SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, any of which could harm our reputation and financial condition, and divert financial and management resources. Even if we are able to report our financial statements accurately and timely, if we do not make all the necessary improvements to address the material weakness, continued disclosure of our material weakness will be required in future filings with the SEC, which could reduce investor confidence in our reported results and our cause our stock price to decline.

If we fail to hire additional finance personnel and strengthen our financial reporting systems and infrastructure, we may not be able to timely and accurately report our financial results or comply with the requirements of being a public company, including compliance with the Sarbanes-Oxley Act and SEC reporting requirements.

We intend to hire additional accounting and finance staff with technical accounting, SEC reporting and Sarbanes-Oxley Act compliance expertise. Any inability to recruit and retain such staff would have an adverse impact on our ability to accurately and timely prepare our financial statements. We may be unable to locate and hire qualified professionals with requisite technical and public company experience when and as needed. In addition, new employees will require time and training to learn our business and operating processes and

 

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procedures. If our finance and accounting organization is unable for any reason to respond adequately to the increased demands that will result from being a public company, the quality and timeliness of our financial reporting may suffer, which could result in the identification of material weaknesses in our internal controls. Any consequences resulting from inaccuracies or delays in our reported financial statements could cause the trading price of our common stock to decline and could harm our business, operating results and financial condition.

If we fail to strengthen our financial reporting systems, infrastructure and internal control over financial reporting to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results timely and accurately and prevent fraud. We expect to incur significant expense and devote substantial management effort toward ensuring compliance with Section 404.

A breach of our security systems may damage our reputation and adversely affect our business.

Our security systems are designed to protect our customers,’ suppliers’ and employees’ confidential information, as well as maintain the physical security of our facilities. We also rely on a number of third-party

“cloud-based” service providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some finance functions, and we are, of necessity, dependent on the security systems of these providers. Any security breaches or other unauthorized access by third parties to the systems of our cloud-based service providers or the existence of computer viruses in their data or software could expose us to a risk of information loss and misappropriation of confidential information. Accidental or willful security breaches or other unauthorized access by third parties to our information systems or facilities, or the existence of computer viruses in our data or software, could expose us to a risk of information loss and misappropriation of proprietary and confidential information belonging to us, our customers or our suppliers. Any theft or misuse of this information could result in, among other things, unfavorable publicity, damage to our reputation, difficulty in marketing our products, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for liabilities and damages related to the theft or misuse of this information, any of which could have a material adverse effect on our business, financial condition, our reputation, and our relationships with our customers and partners. Since the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

Failure to protect our intellectual property could substantially harm our business.

Our success and ability to compete depend in part upon our ability to protect our intellectual property. We rely on a combination of intellectual property rights, including patents, mask work protection, copyrights, trademarks, trade secrets and know-how, in the United States and other jurisdictions. The steps we take to protect our intellectual property rights may not be adequate, particularly in foreign jurisdictions such as China. Any patents we hold may not adequately protect our intellectual property rights or our products against competitors, and third parties may challenge the scope, validity or enforceability of our issued patents. In addition, other parties may independently develop similar or competing technologies designed around any patents or patent applications that we hold. Some of our products and technologies are not covered by any patent or patent application, as we do not believe patent protection of these products and technologies is critical to our business strategy at this time. A failure to timely seek patent protection on products or technologies generally precludes us from seeking future patent protection on these products or technologies.

In addition to patents, we also rely on contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement security measures designed to protect our trade secrets and know-how. However, we cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our customers, suppliers, distributors, employees or consultants will not assert rights to intellectual property or damages arising out of such contracts.

 

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We may initiate claims against third parties to protect our intellectual property rights if we are unable to resolve matters satisfactorily through negotiation. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management. It could also result in the impairment or loss of portions of our intellectual property, as an adverse decision could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations. Additionally, any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. Our failure to secure, protect and enforce our intellectual property rights could materially harm our business.

We may face claims of intellectual property infringement, which could be time-consuming, costly to defend or settle, result in the loss of significant rights, harm our relationships with our customers and distributors, or otherwise materially adversely affect our business, financial condition and results of operations.

The semiconductor memory industry is characterized by companies that hold patents and other intellectual property rights and that vigorously pursue, protect and enforce intellectual property rights. These companies include patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may provide little or no deterrence. From time to time, third parties may assert against us and our customers’ patent and other intellectual property rights to technologies that are important to our business.

Claims that our products, processes or technology infringe third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel. We may also be obligated to indemnify our customers or business partners in connection with any such litigation, which could result in increased costs. Infringement claims also could harm our relationships with our customers or distributors and might deter future customers from doing business with us. If any such proceedings result in an adverse outcome, we could be required to:

 

    cease the manufacture, use or sale of the infringing products, processes or technology;

 

    pay substantial damages for infringement;

 

    expend significant resources to develop non-infringing products, processes or technology, which may not be successful;

 

    license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;

 

    cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or

 

    pay substantial damages to our customers to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available.

Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations. Furthermore, our exposure to the foregoing risks may also be increased as a result of acquisitions of other companies or technologies. For example, we may have a lower level of visibility into the development process with respect to intellectual property or the care taken to safeguard against infringement risks with respect to the acquired company or technology. In addition, third parties may make infringement and similar or related claims after we have acquired technology that had not been asserted prior to the acquisition.

We rely upon third-party licensed technology to develop our products. If licenses of third-party technology are inadequate, our ability to develop and commercialize our products or product enhancements could be negatively impacted.

Our products incorporate technology licensed from third parties. In connection with our acquisition of certain flash memory assets from Atmel Corporation in 2012, we obtained a perpetual license to Atmel’s flash

 

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memory technology. In addition, a component of our CBRAM technology is licensed from Axon Technology Corp. While we believe these licenses enable us to develop our products and pursue our current product strategies, these licenses may not provide us with the benefits we expect from them. From time to time, we may be required to license additional technology from third parties to develop our products or product enhancements. However, these third-party licenses may not be available to us on commercially reasonable terms or at all. Our inability to obtain third-party licenses necessary to develop products and product enhancements could require us to obtain substitute technology at a greater cost or of lower quality or performance standards or delay product development. Any of these results may limit our ability to develop new products, which could harm our business, financial condition and results of operations.

Our success depends on our ability to attract and retain key employees, and our failure to do so could harm our ability to grow our business and execute our business strategies.

Our success depends on our ability to attract and retain our key employees, including our management team and experienced engineers. Competition for personnel in the semiconductor technology field is intense, and the availability of suitable and qualified candidates is limited. We compete to attract and retain qualified research and development personnel with other semiconductor companies, universities and research institutions, particularly those in the San Francisco Bay area where our headquarters is located. The members of our management and key employees are at-will employees and although we recently issued refresh equity awards to our personnel in connection with this offering, there can be no assurance that these awards will be effective to retain our key employees. If we lose the services of any key senior management member or employee, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new personnel, which could severely impact our business and prospects. The loss of the services of one or more of our key employees, especially our key engineers, or our inability to attract and retain qualified engineers, could harm our business, financial condition and results of operations.

We may not be able to effectively manage our growth, and we may need to incur significant expenditures to address the additional operational and control requirements of our growth, either of which could harm our business and operating results.

As we continue to expand our business, we expect our headcount and overall size of our operations to grow significantly. To effectively manage our growth, we must continue to expand our operational, engineering and financial systems, procedures and controls and to improve our accounting and other internal management systems. This may require substantial managerial and financial resources, and our efforts in this regard may not be successful. Our current systems, procedures and controls may not be adequate to support our future operations. If we fail to adequately manage our growth, or to improve our operational, financial and management information systems, or fail to effectively motivate or manage our new and future employees, the quality of our products and the management of our operations could suffer, which could adversely affect our operating results.

The forecasts of market growth and other forward-looking information included in this prospectus may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, or at all.

Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. Forecasts relating to potential market size in our industry may prove to be inaccurate. Even if the forecasted growth occurs, our business may not grow at a similar rate, or at all. Furthermore, our estimate of the market opportunity is subject to significant uncertainty and is based on assumptions and estimates, including our internal analyses, industry experience and third-party data. Accordingly, our estimated market opportunity may prove to be materially inaccurate. In addition, our growth and ability to serve a significant portion of this estimated market is subject to many factors, including our success in implementing our business strategy and the growth of the IoT market. We cannot assure you that we will be able to serve a significant portion of this market and the growth forecasts included in this prospectus should not be taken as indicative of our future growth.

 

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We have engaged in acquisitions in the past and may continue to expand through acquisitions of, or investments in, other companies, each of which may divert our management’s attention, result in additional dilution to stockholders or use resources that are necessary to operate our business.

In the past, we have grown our business through acquisitions and we may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our business, enhance our technical capabilities or otherwise offer growth opportunities. For example, in September 2012, we purchased certain flash memory product assets from Atmel Corporation, which brought us a large customer base for products, a world-wide sales and distribution network and products and technology to further broaden our technology platform offerings. Such acquisitions or investments could create risks for us, including:

 

    difficulties in assimilating acquired personnel, operations and technologies or realizing synergies expected in connection with an acquisition, particularly with acquisitions of companies with large and widespread operations, complex products or that operate in markets in which we historically have had limited experience;

 

    unanticipated costs or liabilities, including possible litigation, associated with the acquisition;

 

    incurrence of acquisition-related costs;

 

    diversion of management’s attention from other business concerns;

 

    use of resources that are needed in other parts of our business; and

 

    use of substantial portions of our available cash to consummate an acquisition.

A significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill, which must be assessed for impairment at least annually. If such acquisitions do not yield expected returns, we may be required to take charges to our earnings based on this impairment assessment process, which could harm our results of operations.

We may be unable to complete acquisitions at all or on commercially reasonable terms, which could limit our future growth. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of additional debt, which could adversely affect our operating results and result in a decline in our stock price and further restrict our ability to pursue business opportunities, including potential acquisitions. In addition, if an acquired business fails to meet our expectations, our operating results may suffer.

We have operations outside of the United States and intend to expand our international operations, which exposes us to significant risks.

We have limited operations in Europe and Asia. We intend to expand our operations in Asia. The success of our business depends, in large part, on our ability to operate successfully from geographically disparate locations and to further expand our international operations and sales. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that are different from those we face in the United States. We cannot be sure that further international expansion will be successful. In addition, we face risks in doing business internationally that could expose us to reduced demand for our products, lower prices for our products or other adverse effects on our operating results. Among the risks we believe are most likely to affect us are:

 

    difficulties, inefficiencies and costs associated with staffing and managing foreign operations;

 

    longer and more difficult customer qualification and credit checks;

 

    greater difficulty collecting accounts receivable and longer payment cycles;

 

    the need for various local approvals to operate in some countries;

 

    difficulties in entering some foreign markets without larger-scale local operations;

 

 

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    compliance with local laws and regulations;

 

    unexpected changes in regulatory requirements, including the elimination of tax holidays;

 

    reduced protection for intellectual property rights in some countries;

 

    adverse tax consequences as a result of repatriating cash generated from foreign operations to the United States;

 

    adverse tax consequences, including potential additional tax exposure if we are deemed to have established a permanent establishment outside of the United States;

 

    the effectiveness of our policies and procedures designed to ensure compliance with the Foreign Corrupt Practices Act of 1977 and similar regulations;

 

    fluctuations in currency exchange rates, which could increase the prices of our products to customers outside of the United States, increase the expenses of our international operations by reducing the purchasing power of the U.S. dollar and expose us to foreign currency exchange rate risk if, in the future, we denominate our international sales in currencies other than the U.S. dollar;

 

    new and different sources of competition; and

 

    political and economic instability, and terrorism.

Our failure to manage any of these risks successfully could harm our operations and reduce our revenue.

In order to comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and if we fail to comply with environmental regulations we could be subject to substantial fines or be required to have our suppliers alter their processes.

The semiconductor memory industry is subject to a variety of international, federal, state and local governmental regulations directed at preventing or mitigating environmental harm, as well as to the storage, discharge, handling, generation, disposal and labeling of toxic or other hazardous substances. Failure to comply with environmental regulations could subject us to civil or criminal sanctions and property damage or personal injury claims. Compliance with current or future environmental laws and regulations could restrict our ability to expand our business or require us to modify processes or incur other substantial expenses which could harm our business. In response to environmental concerns, some customers and government agencies impose requirements for the elimination of hazardous substances, such as lead (which is widely used in soldering connections in the process of semiconductor packaging and assembly), from electronic equipment. For example, the European Union adopted its Restriction on Hazardous Substance Directive which prohibits, with specified exceptions, the sale in the EU market of new electrical and electronic equipment containing more than agreed levels of lead or other hazardous materials and China has enacted similar regulations. Environmental laws and regulations such as these could become more stringent over time, causing a need to redesign technologies, imposing greater compliance costs and increasing risks and penalties associated with violations, which could seriously harm our business.

The issuance of new accounting standards or future interpretations of existing accounting standards could adversely affect our operating results.

We prepare our financial statements in accordance with GAAP. A change in those principles could have a significant effect on our reported results and might affect our reporting of transactions completed before a change is announced. GAAP is issued and subject to interpretation by the Financial Accounting Standards Board, the SEC and various other bodies formed to promulgate and interpret accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. The issuance of new accounting standards or future interpretations of existing accounting standards, or changes in our business practices or estimates, could result in future changes in our revenue recognition or other accounting policies that could have a material adverse effect on our results of operations.

 

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Some of our facilities and the facilities of our suppliers are located near known earthquake fault zones, and the occurrence of an earthquake or other catastrophic disaster could damage our facilities, which could cause us to curtail our operations.

Our principal offices, and our contract manufacturers’ and suppliers’ facilities in Asia, are located near known earthquake fault zones and, therefore, are vulnerable to damage from earthquakes. We are also vulnerable to damage from other types of disasters, such as power loss, fire, floods and similar events. If any such disaster were to occur, our ability to operate our business could be seriously impaired. In addition, we may not have adequate insurance to cover our losses resulting from disasters or other similar significant business interruptions. Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition.

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

We have funded our operations since inception through equity financings and our borrowing arrangements. We have incurred net losses and negative cash flows from operating activities since our inception, and we expect we will continue to incur operating and net losses and negative cash flows from operations for the foreseeable future. We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. In the future, we may require additional capital to fund our ongoing operations, respond to business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities, but we may not be able to timely secure additional debt or equity financing on favorable terms or at all.

Our current term loan facility limits our ability to incur indebtedness, and these restrictions are subject to a number of qualifications and exceptions subject to the consent of our lender. Any additional debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

If we raise additional funds through issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

Provisions of our debt agreements may restrict our ability to pursue our business strategies.

Borrowings under our $15.0 million term loan facility are secured by substantially all of our assets. Our term loan facility restricts our ability to, among other things:

 

    dispose of or sell assets;

 

    consolidate or merge with other entities;

 

    incur additional indebtedness;

 

    create liens on our assets;

 

    pay dividends;

 

    make investments;

 

    enter into transactions with affiliates; and

 

    redeem subordinated indebtedness.

 

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These restrictions are subject to certain exceptions. In addition, our term loan facility requires us to comply with a minimum quarterly adjusted EBITDA covenant (measured on a trailing three-month basis) and a minimum monthly liquidity ratio. The operating and financial restrictions and covenants in the term loan facility, as well as any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. Our ability to comply with these covenants may be affected by events beyond our control, and we may not be able to meet those covenants. For example, in the past, we have not been in compliance with certain financial covenants in our debt agreements, which may occur again in the future. A breach of any of these covenants could result in a default under the credit facility, which could cause all of the outstanding indebtedness thereunder to either (i) become immediately due and payable or (ii) increase by five percent of the interest rate charged during the period of the unremedied breach.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or NOLs, to offset future taxable income, and tax credits to offset tax. In addition, although we do not expect to undergo an ownership change in connection with this offering, we may experience an ownership change in the future, and our ability to utilize our NOLs and tax credits could be further limited by Section 382 of the Code. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our net operating losses and tax credits could also be impaired under state laws. As a result, we might not be able to utilize a material portion of our state NOLs and tax credits.

We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, as well as rules and regulations subsequently implemented by the SEC and the NASDAQ Stock Market, including the establishment and maintenance of effective disclosure and internal controls and the establishment corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly.

We expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an emerging growth company, as defined by the JOBS Act. We also will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

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

As a public company, we will be required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. 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 fiscal year ending December 31, 2016, provide a management report on our internal control

 

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over financial reporting, which must be attested to by our independent registered public accounting firm to the extent we are no longer an “emerging growth company,” as defined by the JOBS Act. If we have one or more material weaknesses 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 designing and implementing our internal control over financial reporting required to comply with this obligation, which process will be time consuming, costly and complicated. If we identify additional material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to determine that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected, and we could become subject to investigations by the NASDAQ Stock Market, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.

Pursuant to the Dodd-Frank Act, the SEC has adopted requirements for companies that use certain minerals and metals, known as conflict minerals, in their products, whether or not these products are manufactured by third parties. These requirements will require companies to diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these requirements could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of our products, and affect our costs and relationships with customers, distributors and suppliers as we must obtain additional information from them to ensure our compliance with the disclosure requirement. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. Since our supply chain is complex, we may not be able to sufficiently verify the origins for these minerals and metals used in our products through the due diligence procedures that we implement, which may harm our reputation. In such event, we may also face difficulties in satisfying customers who require that all of the components of our products are certified as conflict mineral free and these customers may discontinue, or materially reduce, purchases of our products, which could result in a material adverse effect on our results of operations and our financial condition may be adversely affected.

We are an emerging growth company. We cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. For as long as we continue to be an emerging growth company, we also intend to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies including the exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, the reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our then most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

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Risks Related to Our Initial Public Offering and Ownership of Our Common Stock

There has been no prior public market for our common stock, the stock price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

There has been no public market for our common stock prior to our initial public offering. The initial public offering price for our common stock will be determined through negotiations between the underwriters and us and may not be indicative of prices that will prevail in the market following this offering. If you purchase shares of our common stock in this offering, you may not be able to resell those shares at or above the initial public offering price. An active or liquid market in our common stock may not develop upon closing of this offering or be sustainable. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

 

    overall performance of the equity markets in general, in our industry or in the markets we address;

 

    our operating performance and the performance of other similar companies;

 

    changes in the estimates of our results of operations that we provide to the public, our failure to meet these projected results or changes in recommendations by securities analysts that elect to follow our common stock;

 

    announcements of technological innovations, new products or enhancements to products, acquisitions, strategic alliances or significant agreements by us or by our competitors;

 

    announcements of new business partners, on the termination of existing business partner arrangements or changes to our relationships with such business partners;

 

    recruitment or departure of key personnel;

 

    announcements of litigation or claims against us;

 

    changes in legal requirements relating to our business;

 

    the economy as a whole, market conditions in our industry, and the industries of our customers and end customers;

 

    trading activity by our principal stockholders;

 

    the size of our market float; and

 

    any other factors discussed in this prospectus.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

lf securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. If few analysts commence coverage of our company, the price and trading volume of our stock could suffer. If one or more of the analysts who cover us downgrade our stock, or publish unfavorable research about our business, our stock price would likely decline rapidly. If one or more of these analysts cease coverage of our company or fail to publish regularly, we could lose visibility in the market, which in turn could cause our stock price to decline.

 

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The concentration of our capital stock ownership with insiders upon the completion of this offering will likely limit your ability to influence corporate matters.

We anticipate that our executive officers, directors, current principal stockholders and their affiliates will beneficially own an aggregate of approximately 64 percent of our common stock outstanding after this offering. As a result, these stockholders, acting together, will have control over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have the effect of discouraging or preventing a change of control of our company that other stockholders may view as beneficial.

We have broad discretion in the use of the net proceeds from our initial public offering and may not use them effectively.

We cannot specify with any certainty the particular uses of the net proceeds that we will receive from our initial public offering. We expect to use the net proceeds that we receive from this offering for working capital and other general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, products, services, technologies or other assets or to repay borrowings under our three-year $15.0 million term loan facility. We may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest the net proceeds from our initial public offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.

You will experience immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of the outstanding common stock as of June 30, 2015. Therefore, based on an assumed offering price of $11.00 per share (the midpoint of the price range on the cover of this prospectus), if you purchase our common stock in this offering, you will suffer immediate and substantial dilution of approximately $8.54 per share. If the underwriters exercise their over-allotment option, or if outstanding options and warrants to purchase our common stock are exercised, you will experience additional dilution.

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

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the contractual lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline below the initial public offering price and our ability to raise capital through the sale of equity securities could be impaired. Based on shares outstanding as of June 30, 2015, upon completion of this offering, we will have outstanding 13,944,621 shares of common stock, assuming no exercise of the underwriters’ over-allotment option. Of these outstanding shares, all of the 4,100,000 shares of common stock sold in this offering are expected to be freely tradable. All of our executive officers and directors and the holders of substantially all of our capital stock prior to this offering are subject to lock-up agreements with the underwriters that restrict their ability to sell shares in the public market for 180 days from the date of this prospectus. Needham & Company, LLC and Oppenheimer & Co. Inc. may, however, in their sole discretion, permit shares to be sold prior to the expiration of the lock-up agreements.

After the lock-up agreements pertaining to this offering expire, an additional 9,844,621 shares will be eligible for sale in the public market, 5,242,787 of which are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, and various vesting agreements. In addition, after giving effect to the net exercise of warrants that would expire if not exercised prior to the completion of this offering, 411,499 shares subject to

 

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outstanding warrants and the 2,612,098 shares subject to outstanding options and reserved for future issuance under our 2007 Equity Incentive Plan as of June 30, 2015 or, after this offering, under our 2015 Equity Incentive Plan, will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Certain holders of shares of our common stock have registration rights. See “Description of Capital Stock—Registration Rights.” Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act. Sales of securities by any of these stockholders could adversely affect the trading price of our common stock.

We do not intend to pay dividends for the foreseeable future.

We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. In addition, our ability to pay cash dividends on our capital stock is restricted by the terms of our term loan facility and is likely to be restricted by any future debt financing arrangement. Any return to stockholders will therefore be limited to increases in the price of our common stock, if any.

Provisions in our amended and restated certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management.

Delaware corporate law and our amended and restated certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change in control of our company or changes in our board of directors that the stockholders of our company may deem advantageous. Among other things, these provisions:

 

    establish a classified board of directors so that not all members of our board are elected at one time;

 

    provide that directors may be removed only “for cause” and only with the approval of stockholders representing 66 2/3 percent of our outstanding common stock;

 

    require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and bylaws;

 

    authorize the issuance of “blank check” preferred stock that our board could issue to increase the number of outstanding shares and to discourage a takeover attempt;

 

    eliminate the ability of our stockholders to call special meetings of stockholders;

 

    prohibit stockholder action by written consent, which means that all stockholder actions will be required to be taken at a meeting of our stockholders;

 

    provide that our board of directors is expressly authorized to make, alter or repeal our bylaws; and

 

    establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. See “Description of Capital Stock—Anti-Takeover Provisions—Delaware Law” for more information. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

 

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Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine. 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. This limitation may discourage these types of lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or to our future financial or operating performance. You can generally identify forward-looking statements because they contain words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intend,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions. We have based these forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled “Risk Factors” and elsewhere in this prospectus. Accordingly, you should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those projected in the forward-looking statements. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

    our expectations regarding our revenue growth;

 

    anticipated trends and challenges in our business and in the markets in which we operate;

 

    our anticipated strategies for growth and sources of new revenue;

 

    our plans to expand our manufacturing capabilities;

 

    additions to our salesforce and continued collaboration with customers;

 

    future investment in our technology platforms and the return on such investments;

 

    our beliefs with respect to our intellectual property portfolio;

 

    our plans to license our CBRAM platform;

 

    our plans to introduce new product families, including those based on our CBRAM technology;

 

    our ability to anticipate market needs and develop enhancements of our products to meet those needs;

 

    maintaining and expanding our customer base and our distribution relationships;

 

    our ability to compete in our rapidly evolving markets and innovation by our competitors;

 

    our reliance on distribution partners to promote sales of our products;

 

    the evolution of technology affecting our products and markets;

 

    our ability to retain and hire necessary employees and to staff our operations appropriately;

 

    our liquidity and working capital requirements;

 

    our need to obtain additional funding and our ability to obtain future funding on acceptable terms;

 

    the estimates and estimate methodologies used in preparing our consolidated financial statements and determining option exercise prices; and

 

    the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

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INDUSTRY AND MARKET DATA

Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations and market opportunity and market size, is based on information from various sources, including Garter, Inc. (Gartner) and Web-Feet Research, Inc. (Web-Feet), on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the market for our products. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. While we believe the market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described in the “Risk Factors” section and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

The Gartner Report described herein (the Gartner Report) represents data, research opinion or viewpoints published as part of a syndicated subscription service by Gartner and are not representations of fact. The Gartner Report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner Report are subject to change without notice.

Certain information in this prospectus is contained in independent industry reports. The source of, and selected additional information contained in, these independent industry reports are provided below:

(1) Gartner, Forecast Analysis: Internet of Things, Endpoints and Associated Services, Worldwide, 2014 Update , by Pete Middleton, Thilo Koslowski and Angela McIntyre, December 2, 2014.

(2) Web-Feet, Quarterly Flash Component Forecast report , March, 2015.

 

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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 $39.4 million, based on an assumed initial public offering price of $11.00 per share, which is the midpoint of the offering 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. If the underwriters’ over-allotment option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds would be approximately $45.7 million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share would increase or decrease the net proceeds that we receive from this offering by approximately $3.8 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 payable by us.

The principal purposes of this offering are to obtain additional capital, to create a public market for our common stock and to facilitate our future access to the public equity markets. We expect to use the net proceeds that we receive from this offering for working capital and other general corporate purposes, including research and development activities, sales and marketing activities and capital expenditures, to enhance existing and develop new products and product families, expand our manufacturing capabilities or fund our growth. We may also use a portion of the net proceeds that we receive from this offering for investments in or acquisitions of complementary businesses, products, services, technologies or other assets. We have not entered into any agreements or commitments with respect to any investments or acquisitions at this time.

We may also use a portion of the net proceeds we receive from this offering to repay borrowings under our three-year $15.0 million term loan facility. As of June 30, 2015, we had borrowings of $15.0 million outstanding under the term loan facility, which bear interest at a rate of 5.25% per year. Our term loan facility replaced our prior credit facility. We used the borrowings under our term loan facility to repay in full the total borrowings outstanding under the prior credit facility as of the date we entered into the term loan facility.

We currently have no specific plans for the use of the net proceeds that we receive from this offering. Accordingly, we will have broad discretion in using these proceeds. Pending their use as described above, we plan to invest the net proceeds in short-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

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 cash dividends on our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. In addition, the terms of our $15.0 million term loan facility currently prohibit us from paying dividends.

 

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CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents, debt, preferred stock warrant liability and capitalization as of June 30, 2015, on:

 

    an actual basis;

 

    a pro forma basis to give effect to the automatic conversion of all shares of our convertible preferred stock outstanding as of June 30, 2015 into 9,114,739 shares of our common stock immediately upon the closing of this offering, and the resulting reclassification of the preferred stock warrant liability to additional paid-in capital; and

 

    a pro forma as adjusted basis to give further effect to (1) the sale of the 4,100,000 shares of our common stock in this offering at an assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us; (2) the amendment and restatement of our certificate of incorporation in connection with this offering; and (3) the issuance of 165,741 shares of common stock that we expect to issue upon the net exercise of warrants that would expire if not exercised prior to the completion of this offering, based upon the assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus.

The information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of the offering determined at the pricing of this offering. You should read this table together with our consolidated financial statements and related notes, “Selected Consolidated Financial Data and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each included elsewhere in this prospectus.

 

     As of June 30, 2015  
       Actual         Pro Forma         Pro Forma as  
Adjusted
 
     (in thousands, except share and per share data)  

Cash and cash equivalents

   $ 6,470      $ 6,470      $ 45,913   
  

 

 

   

 

 

   

 

 

 

Debt

     14,133        14,133        14,133   
  

 

 

   

 

 

   

 

 

 

Preferred stock warrant liability

     903        —          —     
  

 

 

   

 

 

   

 

 

 

Convertible preferred stock, no par value per share: 4,653,586 shares authorized, 4,419,853 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma or pro forma as adjusted (unaudited)

     78,467        —          —     
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity (deficit)

      

Preferred stock, $0.0001 par value per share: no shares authorized or issued and outstanding, actual and pro forma (unaudited); 5,000,000 shares authorized, no shares issued or outstanding pro forma as adjusted (unaudited)

     —          —          —     

Common stock, $0.0001 par value per share: 14,696,969 shares authorized, 564,141 shares issued and outstanding, actual; 14,696,969 shares authorized, 9,678,880 shares issued and outstanding, pro forma (unaudited); 100,000,000 shares authorized and 13,944,621 shares issued and outstanding, pro forma as adjusted (unaudited)

     —          1        1   

Additional paid-in capital

     4,032        83,401        122,844   

Accumulated other comprehensive loss

     (191     (191     (191

Accumulated deficit

     (78,204     (78,204     (78,204
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     (74,363     5,007        44,450   
  

 

 

   

 

 

   

 

 

 

Total capitalization

   $ 19,140      $ 19,140      $ 58,583   
  

 

 

   

 

 

   

 

 

 

 

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A $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $3.8 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The number of shares of common stock issued and outstanding actual, pro forma and pro forma as adjusted in the table above does not include the following shares:

 

    744,855 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2015, with a weighted-average exercise price of $1.92 per share;

 

    55,395 shares of our common stock issuable upon the exercise of stock options granted after June 30, 2015, with an exercise price of $10.00 per share;

 

    886,629 shares of common stock issuable upon the vesting of restricted stock units, or RSUs, authorized to be granted as of the closing of this offering;

 

    411,499 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015, with a weighted-average exercise price of $24.72 per share; and

 

    2,017,243 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (1) 1,867,243 shares of common stock available for issuance under our 2007 Equity Incentive Plan as of June 30, 2015, which shares will be reserved under our 2015 Equity Incentive Plan, or the 2015 Plan, to the extent not granted prior to the completion of this offering, (2) 150,000 shares of common stock reserved for future issuance under our 2015 Employee Stock Purchase Plan, which will become effective in connection with this offering and contain provisions that automatically increase its share reserve each year, as more fully described in “Executive Compensation—Employee Benefit Plans.”

 

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DILUTION

If you invest in our common stock in this offering, your interest will be diluted immediately 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/(deficit) per share of our common stock immediately after this offering. Our pro forma net tangible book value/(deficit) as of June 30, 2015 was $(5.2) million, or $(0.54) per share of common stock. Pro forma net tangible book value/(deficit) per share represents the amount of our total tangible assets less our total tangible liabilities, divided by the number of shares of common stock outstanding as of June 30, 2015, after giving effect to the conversion of all shares of our convertible preferred stock outstanding as of June 30, 2015 into 9,114,739 shares of our common stock immediately upon the closing of this offering, and the resulting reclassification of the preferred stock warrant liability to additional paid-in capital.

After giving effect to (1) the sale by us of 4,100,000 shares of common stock in this offering at an assumed initial public offering price of $11.00 per share, which is the midpoint of the offering 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, and (2) the issuance of 165,741 shares of common stock that we expect to issue upon the net exercise of warrants that would expire if not exercised prior to the completion of this offering, based upon the assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, our pro forma as adjusted net tangible book value/(deficit) as of June 30, 2015 would have been approximately $34.3 million, or approximately $2.46 per share. This amount represents an immediate increase in pro forma net tangible book value/(deficit) of $3.00 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value/(deficit) of approximately $8.54 per share to new investors purchasing shares of common stock in this offering at the assumed initial public offering price.

The following table illustrates this dilution:

 

Assumed initial public offering price per share

     $ 11.00   

Net tangible book value/(deficit) per share as of June 30, 2015

   $ (10.80  

Increase in net tangible book value per share attributable to preferred stock conversion

     10.26     
  

 

 

   

Pro forma net tangible book value per share as of June 30, 2015

     (0.54  

Increase in pro forma net tangible book value/(deficit) per share attributable to new investors

     3.00     
  

 

 

   

Pro forma as adjusted net tangible book value/(deficit) per share after this offering

       2.46   
    

 

 

 

Dilution per share to investors in this offering

     $ 8.54   
    

 

 

 

A $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value/(deficit) per share attributable to new investors by approximately $0.29 and would increase or decrease dilution per share to new investors by approximately $0.71, 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.

The following table presents on a pro forma as adjusted basis as of June 30, 2015, after giving effect to the conversion of all outstanding shares of convertible preferred stock into common stock immediately upon the closing of this offering, the differences between the existing stockholders and the new investors purchasing shares of our common stock in this offering, with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes net proceeds received from the issuance of common and convertible preferred stock, cash received from the exercise of stock options and the average price per share paid

 

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or to be paid to us at an assumed offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

     Shares Purchased (1)     Total Consideration (1)     Average Price
Per Share
 
     Number      Percent     Amount      Percent    

Existing stockholders

     9,844,621         70.6   $ 81,480,428         64.4   $ 8.28   

New investors

     4,100,000         29.4        45,100,000         35.6        11.00   
  

 

 

    

 

 

   

 

 

    

 

 

   

Totals

     13,944,621         100.0   $ 126,580,428         100.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

(1) Includes 165,741 shares that we expect to issue upon net exercise of warrants immediately prior to the completion of this offering that would otherwise expire, based upon an assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus.

A $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $3.8 million and increase or decrease the percent of total consideration paid by new investors by 2.0%, 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.

Assuming the underwriters’ over-allotment option to purchase additional shares is exercised in full, the total consideration paid by new investors would increase by approximately $6.8 million, and the percentage of shares held by existing stockholders would decrease to 67.6% and will increase the number of shares held by our new investors to 4,715,000, or 32.4%.

In addition, assuming all of our stock options and warrants outstanding as of June 30, 2015 are exercised in full, the total consideration paid by existing stockholders would increase by approximately $11.6 million, the number of shares held by existing stockholders would increase to 11,000,975, or 72.8%, and the percentage of shares held by our new investors will decrease to 27.2%.

The number of shares of our common stock to be outstanding after this offering is based upon 9,678,880 shares of our common stock outstanding as of June 30, 2015 and 165,741 shares that we expect to issue upon the net exercise of warrants as described above and does not include:

 

    744,855 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2015, with a weighted-average exercise price of $1.92 per share;

 

    55,395 shares of our common stock issuable upon the exercise of stock options granted after June 30, 2015, with an exercise price of $10.00 per share;

 

    886,629 shares of common stock issuable upon the vesting of restricted stock units, or RSUs, authorized to be granted as of the closing of this offering;

 

    411,499 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015, with a weighted-average exercise price of $24.72 per share; and

 

    2,017,243 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (1) 1,867,243 shares of common stock available for issuance under our 2007 Equity Incentive Plan as of June 30, 2015, which shares will be reserved under our 2015 Equity Incentive Plan, or the 2015 Plan, to the extent not granted prior to the completion of this offering, (2) 150,000 shares of common stock reserved for future issuance under our 2015 Employee Stock Purchase Plan, which will become effective in connection with this offering and contain provisions that automatically increase its share reserve each year, as more fully described in “Executive Compensation—Employee Benefit Plans.”

 

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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, 2013 and 2014 and the selected consolidated balance sheets data as of December 31, 2013 and 2014 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the unaudited summary consolidated statements of operations data for the six months ended June 30, 2014 and 2015 and the unaudited summary consolidated balance sheets data as of June 30, 2015 from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements were prepared on a basis consistent with our annual consolidated financial statements and, in the opinion of management, include all adjustments of a normal, recurring nature that are necessary for the fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results to be expected in the future, and our results for the six months ended June 30, 2015 are not necessarily indicative of the operating results to be expected for the full year ending December 31, 2015 or any other period. You should read the following summary consolidated financial data in conjunction with the section entitled “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.

 

     Year Ended December 31,     Six Months Ended
June 30,
 
         2013             2014             2014             2015      
    

(in thousands, except share and per share data)

 

Consolidated Statements of Operations Data:

        

Revenue

   $ 49,684      $ 41,465      $ 21,062      $ 20,290   

Cost of revenue (1)

     29,738        25,532        13,034        12,236   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     19,946        15,933        8,028        8,054   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses: (1)

        

Research and development

     15,033        14,410        7,919        6,096   

Sales and marketing

     8,094        7,211        3,633        4,063   

General and administrative

     2,677        2,356        1,170        1,670   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     25,804        23,977        12,722        11,829   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (5,858     (8,044     (4,694     (3,775

Other income (expense), net

     (2,223     (750     (379     (197
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision for income taxes

     (8,081     (8,794     (5,073     (3,972

Provision for income taxes

     72        140        110        71   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (8,153   $ (8,934   $ (5,183   $ (4,043
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share: (2)

        

Basic and diluted

   $ (15.14   $ (16.48   $ (9.61   $ (7.21
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average number of shares used in computing net loss per share: (2)

        

Basic and diluted

     538,388        542,245        539,228        560,694   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per share (unaudited): (2)

        

Basic and diluted

     $ (0.93     $ (0.42
    

 

 

     

 

 

 

Shares used in computing pro forma net loss per share (unaudited): (2)

        

Basic and diluted

       9,656,984          9,675,433   
    

 

 

     

 

 

 

 

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(1) Includes stock-based compensation expense as follows (in thousands):

 

     Year Ended December 31,      Six Months Ended
June 30,
 
         2013              2014              2014              2015      

Cost of revenue

   $ 1       $ 4       $ 2       $ 3   

Research and development

     95         86         41         41   

Sales and marketing

     13         30         7         21   

General and administrative

     55         126         27         47   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 164       $ 246       $ 77       $ 112   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(2) Please see notes 1 and 12 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share and our pro forma net loss per share.

 

     As of December 31,     As of June 30,
2015
 
          2013               2014         
    

(in thousands)

 

Consolidated Balance Sheets Data:

      

Cash and cash equivalents

   $ 11,580      $ 5,972      $ 6,470   

Property and equipment, net

     2,745        1,725        1,059   

Total assets

     43,589        31,447        32,078   

Current liabilities

     20,139        21,634        15,475 (1)  

Debt

     14,901        10,749        14,133 (1)  

Preferred stock warrant liability

     262        122        903   

Convertible preferred stock

     78,467        78,467        78,467   

Total stockholders’ deficit

     (61,661     (70,252     (74,363

 

(1)   In April 2015 we entered into a three-year $15.0 million term loan facility. As of June 2015, we had net borrowings of $15.0 million outstanding under our term loan facility, of which $4.0 million is included in current liabilities.

Key Metrics

We monitor a variety of key financial metrics to help us evaluate growth trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies. In addition to our financial results determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, we believe the following non-GAAP and operational measures are useful in evaluating our performance. For a discussion of the changes in our key metrics from period to period, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics.”

 

     Year Ended December 31,     Six Months Ended
June 30,
 
         2013             2014         2014     2015  
     (dollars in thousands)  

Non-GAAP gross margin

     42     43     43     39

Adjusted EBITDA

   $ 57      $ (2,912   $ (2,073   $ (2,079

Non-GAAP gross margin.  We define non-GAAP gross profit as gross profit as reported on our consolidated statements of operations, excluding the impact of stock-based compensation and write-downs of inventory for products based on CBRAM technology and losses on CBRAM wafer purchase commitments. We define non-GAAP gross margin as non-GAAP gross profit divided by revenue. Non-GAAP gross margin is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operating plans. In particular, non-GAAP gross margin excludes certain non-cash expenses and certain inventory write-downs that can provide useful measures for period-to-period comparisons of our core business.

 

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Adjusted EBITDA.  We define adjusted EBITDA as our net loss excluding stock-based compensation, write-downs of inventory for products based on CBRAM technology and losses on CBRAM wafer purchase commitments, amortization of acquisition-related intangible assets, interest expense, depreciation and amortization, and our provision for income taxes. Adjusted EBITDA is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, to monitor compliance with debt agreements and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance. Accordingly, we believe that adjusted EBITDA provides useful information in understanding and evaluating our operating results in the same manner as our management and our board of directors.

Reconciliation of Non-GAAP Financial Measures

The non-GAAP measures discussed above under “—Key Metrics” have limitations as analytical tools, and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. First, non-GAAP gross margin and adjusted EBITDA are not substitutes for gross margin and net loss, respectively. These non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based compensation and amortization of acquisition-related intangible assets. Stock-based compensation has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and is an important part of our employees’ compensation affecting their performance. Furthermore, while depreciation and amortization and amortization of acquisition-related intangible assets expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements. Adjusted EBITDA also does not reflect changes in, or cash requirements for, our working capital needs and the potentially dilutive impact of stock-based compensation. Finally, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. We urge our investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below and not to rely on any single financial measure to evaluate our business.

The following table reconciles gross profit to non-GAAP gross profit and non-GAAP gross margin:

 

     Year Ended December 31,     Six Months Ended
June 30,
 
         2013             2014         2014     2015  
     (dollars in thousands)  

Gross profit

   $ 19,946      $ 15,933      $ 8,028      $ 8,054   

Stock-based compensation

     1        4        2        3   

Write-downs of inventory for products based on CBRAM technology and losses on CBRAM wafer purchase commitments

     852        1,756        1,010        (150
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

   $ 20,799      $ 17,693      $ 9,040      $ 7,907   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenue

   $ 49,684      $ 41,465      $ 21,062      $ 20,290   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

     42     43     43     39
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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The following table reconciles net loss to adjusted EBITDA:

 

     Year Ended December 31,      Six Months Ended
June 30,
 
         2013              2014          2014      2015  
     (in thousands)  

Net loss

   $ (8,153    $ (8,934    $ (5,183    $ (4,043

Stock-based compensation

     164         246         77         112   

Write-downs of inventory for products based on CBRAM technology and losses on CBRAM wafer purchase commitments

     852         1,756         1,010         (150

Amortization of acquisition-related intangible assets

     3,320         1,236         618         618   

Interest expense, net

     2,731         864         422         486   

Provision for income taxes

     72         140         110         71   

Depreciation and amortization

     1,071         1,780         873         827   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 57       $ (2,912    $ (2,073    $ (2,079
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with the information set forth under “Selected Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. The statements in this discussion regarding our expectations of our future performance, liquidity and capital resources, and other non-historical statements in this discussion, are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Risk Factors” and elsewhere in this prospectus. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

We are a leading provider of application-specific, feature-rich, ultra-low power non-volatile memory products. We optimize our NVM products for Internet of Things, or IoT, applications including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets. We combine our NVM design capabilities with proprietary intellectual property and differentiated technology platforms to deliver high-performance products that dramatically reduce the overall energy consumption of our customers’ systems and extend battery life. Our products feature embedded intelligence in a small form factor and high reliability. We believe that our ultra-low power and feature-rich NVM products will become a key hardware building block for billions of IoT edge devices operating on and connected to networks worldwide. Through December 31, 2014, we have shipped over 200 million units to more than 500 end customers.

Our revenue is derived from the sale of our NVM products, primarily our flash memory products, which represented substantially all of our revenue in 2013 and 2014 and for the six months ended June 30, 2015. On September 28, 2012, we purchased certain flash memory product assets from Atmel Corporation for a total of $25.0 million, of which $22.2 million was funded with term debt from a financial institution. The acquisition brought us a large customer base for NVM products, a world-wide sales and distribution network and products and technology to further broaden our technology platform offerings. The products we acquired as part of the acquisition were approaching the end of their life cycle and experiencing annual revenue declines. While we provide support for these products, we have not invested further in research and development. Revenue from these legacy products have declined from $43.7 million in 2013 to $13.0 million in 2014 and from $10.3 million during the six months ended June 30, 2014 to $1.7 million during the six months ended June 30, 2015. We expect that revenue from these products will continue to decline in the future. Since the acquisition, we have invested in developing new products that are better suited for low-power, high-growth applications, accelerated development of select products and introduced new products based on the acquired technology. In 2013, we introduced the first of our next-generation DataFlash and Fusion Flash products, which have similar functionality to our legacy products, but also offer enhanced features such as ultra-deep power down and wide supply voltage range operation. Collectively, sales of our next-generation NVM products have experienced a high rate of growth. Revenue from these new products were $6.0 million in 2013 and $28.5 million in 2014, and we generated $18.6 million in revenue from new products during the six months ended June 30, 2015. We had been exclusively developing products based on CBRAM technology prior to the acquisition of assets from Atmel, and shipped more than 1.0 million units of our CBRAM-based products by 2014. We continue to develop and enhance our family of CBRAM-based products, although revenue associated with these products has not been material to date. We have made and continue to make these upfront investments because we believe that the introduction of any fundamentally new semiconductor technology must necessarily go through a lengthy customer evaluation process and several cycles of improvement in the field before it can be widely adopted or generate material revenue.

In 2014, our products were sold to more than 500 end customers, 59 of which are large multi-national companies. In general, we work directly with our customers to have our NVM devices designed into and qualified for their products. Although we maintain direct sales, support and development relationships with our customers, once our products are designed into a customer’s product, we sell a majority of our products to those

 

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customers through distributors. We generated 72%, 70% and 65% of our revenue from distributors for the years ended December 31, 2013 and 2014 and for the six months ended June 30, 2015, respectively, and sales to three distributors generated approximately 54% and 26% of our revenue in 2014 and for the six months ended June 30, 2015, respectively. Additionally, we derived more than 85%, 82% and 80% of our revenue internationally for the years ended December 31, 2013 and 2014 and during the six months ended June 30, 2015, respectively, the majority of which was recognized in the APAC region. Revenue by geography is recognized based on the region to which our products are sold, and not to where the end products are shipped.

We employ a fabless manufacturing strategy and use market-leading suppliers for all phases of the manufacturing process, including wafer fabrication, assembly, testing and packaging. This strategy significantly reduces the capital investment that would otherwise be required to operate manufacturing facilities of our own.

In order to develop differentiated products to attract and retain customers, we have made significant investments in research and development. For the years ended December 31, 2013 and 2014 and during the six months ended June 30, 2015, our research and development expense was $15.0 million, $14.4 million and $6.1 million, respectively. We expect that our research and development expenses will increase significantly in the future as we pursue the opportunities we see in the emerging IoT market. As of June 30, 2015, we had 84 employees, approximately 60% of whom are in research and development. Our headquarters are located in Sunnyvale, California, with additional sales operations in North America, the Middle East and Africa, or EMEA, and Asia-Pacific, or APAC, regions. We recorded revenue of $49.7 million and $41.5 million, and net loss of $8.2 million and $8.9 million, for the years ended December 31, 2013 and 2014, respectively. In addition, our revenue decreased from $21.1 million during the six months ended June 30, 2014 to $20.3 million during the six months ended June 30, 2015 and our net loss decreased from $5.2 million to $4.0 million over that same period.

Key Metrics

We monitor a variety of key financial metrics to help us evaluate growth trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies. In addition to our financial results determined in accordance with GAAP, we believe the following non-GAAP and operational measures are useful in evaluating our performance.

 

     Year Ended
December 31,
    Six Months Ended
June 30,
 
         2013             2014             2014             2015      
     (dollars in thousands)  

Non-GAAP gross margin

     42     43     43     39

Adjusted EBITDA

   $ 57      $ (2,912   $ (2,073   $ (2,079

Non-GAAP gross margin.  We define non-GAAP gross profit as gross profit as reported on our consolidated statements of operations, excluding the impact of stock-based compensation and write-downs of inventory for products based on CBRAM technology and losses on CBRAM wafer purchase commitments. We define non-GAAP gross margin as non-GAAP gross profit divided by revenue. Non-GAAP gross margin is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operating plans. Non-GAAP gross margin increased in 2014 as compared to 2013 as a result of a higher level of revenue from new products. Non-GAAP gross margin for the six months ended June 30, 2015 was lower than non-GAAP gross margin for the six months ended June 30, 2014 due primarily to lower costs for legacy products in the six months ended June 30, 2014. As a result of the decrease in non-GAAP gross margin, we have accelerated our ongoing efforts to reduce new product costs, including qualifying second source suppliers, primarily for assembly services, and investing higher resources to accelerate the transfer of certain products into more advanced wafer fabrication technologies, which we expect to result in lower product costs beginning in the first half of 2016.

Adjusted EBITDA.  We define adjusted EBITDA as our net loss excluding: stock-based compensation, write-downs of inventory for products based on CBRAM technology and losses on CBRAM wafer purchase

 

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commitments, amortization of acquisition-related intangible assets, interest expense, depreciation and amortization, and our provision for income taxes. Adjusted EBITDA is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, to monitor compliance with debt agreements and to develop short and long-term operating plans. Adjusted EBITDA decreased from $0.1 million in 2013 to $(2.9) million in 2014, as a result of higher losses from operations and lower amortization of acquisition-related intangible assets and interest expense. Adjusted EBITDA was $(2.1) million for the six months ended June 30, 2014 and the six months ended June 30, 2015. In light of the adjusted EBITDA loss for the six months ended June 30, 2015, we assessed our current and projected levels of spending and revenue outlook relative to our internal plans, and decided to continue to invest in our business in accordance with those plans, including hiring additional personnel, primarily in Asia, to expand our sales and marketing organization and increasing research and development spending to continue the introduction of new products.

See “Selected Consolidated Financial Data—Key Metrics” for more information and reconciliations of non-GAAP financial measures to their most directly comparable financial measures calculated in accordance with GAAP.

Factors Affecting Our Performance

Product adoption in new markets and applications. We optimize our products to meet the technical requirements of the emerging IoT market. The growth in the IoT market is dependent on many factors, most of which are outside of our control. Should the IoT market not develop or develop more slowly, our financial results could be adversely affected.

Ability to attract and retain customers that make large orders .  In 2014, our products were sold to more than 500 end customers, of which approximately 50 generated more than half our revenue. While we expect the composition of our customers to change over time, our business and operating results will depend on our ability to continually target new and retain existing customers that make large orders, particularly those in growth markets which are less dependent on macroeconomic conditions.

Design wins with new and existing customers .  We believe our solutions significantly improve the performance and potentially lower the system cost of our customers’ designs, particularly if we are part of the early design phase. Accordingly, we work closely with our customers and targeted prospects to understand their product roadmaps and strategies. We consider design wins to be critical to our future success. We define a design win as the successful completion of the evaluation stage, where a customer has tested our product, verified that our product meets its requirements and qualified our NVM device for their products. The number of our design wins has grown from 32 in 2013 to 65 in 2014 and to 115 in the nine months ended September 30, 2015, including 6, 63 and 109 design wins for new products, respectively. The revenue that we generate, if any, from each design win can vary significantly. Our long-term sales expectations are based on forecasts from customers, internal estimates of customer demand factoring in expected time to market for end customer products incorporating our solutions and associated revenue potential and internal estimates of overall demand based on historical trends.

Pricing, product cost and gross margins of our products .  Our gross margin has been and will continue to be affected by a variety of factors, including the timing of changes in pricing, shipment volumes, new product introductions, changes in product mixes, changes in our purchase price of fabricated wafers and assembly and test service costs, manufacturing yields and inventory write downs, if any. In general, newly introduced products and products with higher performance and more features tend to be priced higher than older, more mature products. Average selling prices in the semiconductor industry typically decline as products mature. Consistent with this historical trend, we expect that the average selling prices of our products will decline as they mature. In the normal course of business, we will seek to offset the effect of declining average selling prices on existing products by reducing manufacturing costs and introducing new and higher value-added products. If we are unable to maintain overall average selling prices or offset any declines in average selling prices with realized savings on product costs, our gross margin will decline.

 

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Index to Financial Statements

Investment in growth. We have invested, and intend to continue to invest, in expanding our operations, increasing our headcount, developing our products and differentiated technologies to support our growth and expanding our infrastructure. We expect our total operating expenses to increase significantly in the foreseeable future to meet our growth objectives. We plan to continue to invest in our sales and support operations throughout the world, with a particular focus in the near term of adding additional sales and field applications personnel in APAC to further broaden our support and coverage of our existing customer base, in addition to developing new customer relationships and generating design wins. We also intend to continue to invest additional resources in research and development to support the development of our products and differentiated technologies. Any investments we make in our sales and marketing organization or research and development will occur in advance of experiencing any benefits from such investments, and the return on these investments may be lower than we expect. In addition, as we invest in expanding our operations internationally, our business and results will become further subject to the risks and challenges of international operations, including higher operating expenses and the impact of legal and regulatory developments outside the United States.

Components of Our Results of Operations

Revenue

We derive substantially all of our revenue through the sale of our NVM products to OEMs and ODMs, primarily through distributors. We generated 72%, 70% and 65% of our revenue from distributors for the years ended December 31, 2013 and 2014 and for the six months ended June 30, 2015, respectively. We recognize revenue from product sales when persuasive evidence of an arrangement exists and all other revenue recognition criteria are met. We sell the majority of our products to distributors and generally recognize revenue when we ship the product directly to the distributors.

Because our distributors market and sell their products worldwide, our revenue by geographic location is not necessarily indicative of where our customers’ product sales and design win activity occur, but rather of where their manufacturing operations occur.

Cost of Revenue and Gross Margin

Cost of revenue primarily consists of costs paid to our third-party manufacturers for wafer fabrication, assembly and testing of our NVM products, write-downs of inventory for excess and obsolete inventories including write-downs of inventory for products based on CBRAM technology and accruals for future losses on CBRAM wafer purchase commitments to the extent our costs exceed the market price for such products. To a lesser extent, cost of revenue also includes depreciation of test equipment and expenses relating to manufacturing support activities, including personnel-related costs, logistics and quality assurance and shipping.

Our gross margin has been and will continue to be affected by a variety of factors, including the timing of changes in pricing, shipment volumes, new product introductions, changes in product mixes, changes in our purchase price of fabricated wafers and assembly and test service costs, manufacturing yields and inventory write downs, if any. We expect our gross margin to fluctuate over time depending on the factors described above.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing and general and administrative expense. Personnel-related costs, including salaries, benefits, bonuses and stock-based compensation, are the most significant component of each of our operating expense categories. In addition, in the near term we expect to hire additional personnel, primarily in our selling and marketing functions, and increase research and development expenditures, such as prototype wafers, associated with the implementation of our CBRAM technology in a manufacturing facility in Asia. Accordingly, we expect our operating expenses to increase as we invest in these initiatives.

 

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Research and Development . Our research and development expenses consist primarily of personnel-related costs for the design and development of our products and technologies. Additional research and development expenses include product prototypes, mask costs, external test and characterization expenses, depreciation, amortization of design tool software licenses, amortization of acquisition-related intangible assets and allocated overhead expenses. We also incur costs related to outsourced research and development activities. We expect research and development expenses to increase in absolute dollars for the foreseeable future as we continue to improve our product features, increase our portfolio of solutions and implement our CBRAM manufacturing technology in a new manufacturing facility.

Sales and Marketing. Sales and marketing expenses consist primarily of personnel-related costs for our sales, business development, marketing, and applications engineering activities, third-party sales representative commissions, promotional and other marketing expenses, amortization of acquisition-related intangible assets and travel expenses. We expect sales and marketing expenses to increase in absolute dollars for the foreseeable future as we continue to expand our direct sales teams, primarily in APAC, and increase our marketing activities.

General and Administrative . General and administrative expenses consist primarily of personnel-related costs, consulting expenses and professional fees. Professional fees principally consist of legal, audit, tax and accounting services. We expect general and administrative expenses to increase in absolute dollars for the foreseeable future as we hire additional personnel, make improvements to our infrastructure and incur significant additional costs for the compliance requirements of operating as a public company, including higher legal, insurance and accounting expenses.

Other Income (Expense), Net

Other income (expense), net is comprised of interest income (expense) and other income (expense). Interest expense consists of interest on our outstanding debt. Other expense, net consists primarily of the change in fair value of our preferred stock warrant liability and foreign exchange gains or losses. Our foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

We classify our preferred stock warrants as a liability on our consolidated balance sheets and record changes in fair value at each balance sheet date with the corresponding change recorded as other income (expense). We will continue to record adjustments to the fair value of the warrants at each balance sheet date until they are exercised, automatically convert into warrants to purchase common stock or expire. Following completion of this offering, these warrants will automatically convert into warrants to purchase common stock and, upon that conversion, will no longer be classified as a liability on our consolidated balance sheet and subject to fair value accounting.

Provision for Income Taxes

Provision for income taxes consists primarily of U.S. federal and state income taxes in the United States and income taxes in certain foreign jurisdictions in which we conduct business. We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards, and tax credits related primarily to research and development. We expect to maintain this full valuation allowance for the foreseeable future.

 

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Results of Operations

The following table sets forth our consolidated results of operations for the periods shown:

 

     Year Ended
December 31,
    Six Months Ended
June 30,
 
     2013     2014     2014     2015  
    

(in thousands)

 

Revenue

   $ 49,684      $ 41,465      $ 21,062      $ 20,290   

Cost of revenue (1)

     29,738        25,532        13,034        12,236   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     19,946        15,933        8,028        8,054   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses: (1)

        

Research and development

     15,033        14,410        7,919        6,096   

Sales and marketing

     8,094        7,211        3,633        4,063   

General and administrative

     2,677        2,356        1,170        1,670   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     25,804        23,977        12,722        11,829   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (5,858     (8,044     (4,694     (3,775

Other income (expense), net

     (2,223     (750     (379     (197
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision for income taxes

     (8,081     (8,794     (5,073     (3,972

Provision for income taxes

     72        140        110        71   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (8,153   $ (8,934   $ (5,183   $ (4,043
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Includes stock-based compensation expense as follows (in thousands):

 

     Year Ended
December 31,
     Six Months Ended
June 30,
 
         2013              2014              2014              2015      

Cost of revenue

   $ 1       $ 4       $ 2       $ 3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses:

           

Research and development

     95         86         41         41   

Sales and marketing

     13         30         7         21   

General and administrative

     55         126         27         47   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

     163         242         75         109   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 164       $ 246       $ 77       $ 112   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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The following table sets forth the consolidated statements of operations data for each of the periods presented as a percentage of revenue:

 

     Year Ended
December 31,
    Six Months Ended
June 30,
 
         2013             2014             2014             2015      

Revenue

     100     100     100     100

Cost of revenue (1)

     60        62        62        60   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     40        38        38        40   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses : (1)

        

Research and development

     30        35        38        30   

Sales and marketing

     16        17        17        20   

General and administrative

     5        6        6        8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     52        58        60        58   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (12     (19     (22     (19

Other income (expense), net

     (4     (2     (2     (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision for income taxes

     (16     (21     (24     (20

Provision for income taxes

     —          —          (1     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (16 )%      (22 )%      (25 )%      (20 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Stock-based compensation was not material as a percent of revenue for the periods presented.

Comparison of the Six Months Ended June 30, 2014 and 2015

Revenue

 

     Six Months Ended
June 30,
    Change  
     2014     2015     Amount      %  
     (dollars in thousands)  

Revenue

   $ 21,062      $ 20,290      $ (772      (4 )% 

Revenue by category of products:

         

Legacy products

   $ 10,297      $ 1,738      $ (8,559      (83 )% 

New products

   $ 10,765      $ 18,552      $ 7,787         72

Revenue by geography:

         

United States

     19     20     

Europe

     23     12     

Asia Pacific

     56     65     

Rest of world

     2     3     

Revenue decreased by $0.8 million, or 4%, during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. The decrease was due primarily to a decrease of $0.9 million related to the end of life of a customer program. In addition, we believe that revenue for the six months ended June 30, 2014 was adversely impacted by the bankruptcy in December 2013 of one of our wafer fabrication suppliers, which caused us to be unable to fulfill a portion of our customers’ orders in 2014 while we transitioned wafer production to a new foundry. There was no corresponding impact in the six months ended June 30, 2015.

 

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Cost of Revenue and Gross Margin

 

     Six Months Ended
June 30,
    Change  
     2014     2015     Amount      %  
     (dollars in thousands)  

Cost of revenue

   $ 13,034      $ 12,236      $ (798      (6 )% 

Gross margin

     38     40     

Cost of revenue decreased by $0.8 million, or 6%, during the six months ended June 30, 2015, as compared to the six months ended June 30, 2014, due primarily to a decrease in inventory write-downs of $2.7 million partially offset by an increase of $2.0 million in product costs.

Gross margin increased during the first six months ended June 30, 2015 as compared to the six months ended June 30, 2014 due primarily to a benefit from the sale of $0.7 million of previously written-down product partially offset by increased product costs including increased compensation and equipment depreciation which are being allocated across a smaller revenue base.

Operating Expenses

 

     Six Months Ended
June 30,
        
     2014      2015      Change  
     Amount      Amount      ($)      %  
     (in thousands, except percentages)  

Operating expenses:

           

Research and development

   $ 7,919       $ 6,096       $ (1,823      (23 )% 

Sales and marketing

     3,633         4,063         430         12

General and administrative

     1,170         1,670         500         43
  

 

 

    

 

 

    

 

 

    

Total operating expenses

   $ 12,722       $ 11,829       $ (893      (7 )% 
  

 

 

    

 

 

    

 

 

    

Research and D evelopment . Research and development expense decreased $1.8 million during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014, due to a $0.8 million decrease in personnel-related costs associated with a decrease in headcount and a $0.9 million decrease in mask costs and product prototype expense due to lower product tapeout activity.

Sales and M arketing. Sales and marketing expense increased $0.4 million during the six months ended June 30, 2015, as compared to the six months ended June 30, 2014, due primarily to a $0.3 million increase in personnel-related costs associated with increased headcount and a $0.1 million increase in promotional and marketing costs.

General and A dministrative. General and administrative expenses increased $0.5 million during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014, due primarily to an increase in accounting, tax, and audit expense of $0.4 million, a $0.2 million increase in personnel-related costs associated with an increase in headcount and a $0.1 million decrease in bank fees.

 

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Other Income (Expense), Net

 

     Six
Months Ended
June 30,
     Change  
     2014      2015      Amount      %  
     (dollars in thousands)  

Interest expense, net

   $ (422    $ (486    $ (64      15

Other income (expense), net

     43         289         246         572
  

 

 

    

 

 

    

 

 

    

Total other income (expense), net

   $ (379    $ (197    $ 182         48
  

 

 

    

 

 

    

 

 

    

Interest expense, net increased $64,000 during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 due to increased levels of debt outstanding.

Other income (expense), net increased $0.2 million during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 due primarily to a settlement with Atmel regarding certain funds held in escrow in connection with our purchase of assets from them.

Provision for Income Taxes

 

     Six
Months Ended
June 30,
     Change  
     2014      2015      Amount      %  
     (dollars in thousands)  

Provision for income taxes

   $ 110       $ 71       $ (39      (35 )% 

Provision for income taxes decreased due to a reduction in tax expense related to our French subsidiary.

Comparison of Years Ended December 31, 2013 and 2014

Revenue

 

     Year Ended
December 31,
    Change  
     2013     2014     Amount      %  
     (dollars in thousands)  

Revenue

   $ 49,684      $ 41,465      $ (8,219      (17 )% 

Revenue by category of products:

         

Legacy products

   $ 43,715      $ 13,006      $ (30,709      (70 )% 

New products

   $ 5,969      $ 28,459      $ 22,490         377

Revenue by geography:

         

United States

     15     18     

Europe

     17     18     

Asia Pacific

     65     62     

Rest of world

     3     2     

Revenue decreased by $8.2 million, or 17%, for 2014 as compared to 2013. The decrease was due primarily to a significant interruption in 2014 in our ability to supply sufficient legacy products to meet market demand as a result of the sudden declaration of bankruptcy in December 2013 by one of our wafer fabrication suppliers. Due to the bankruptcy, the supplier shut down its foundry and was unable to deliver to us wafers that were in production at that time and, therefore, we were unable to fulfill a portion of our customers’ orders in 2014 while we transitioned wafer production to a new foundry. Based on the average selling prices then in effect for those wafers, we estimate that the potential loss of revenue from sales of these legacy products exceeded $10.0 million. We believe the potential loss primarily impacted the first two quarters of 2014, as the process of transitioning our wafer production to another foundry, which began before the bankruptcy, was largely completed in the first half of 2014.

 

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Cost of Revenue and Gross Margin

 

     Year Ended
December 31,
    Change  
     2013     2014     Amount      %  
     (dollars in thousands)  

Cost of revenue

   $ 29,738      $ 25,532      $ (4,206      (14 )% 

Gross margin

     40     38     

Cost of revenue decreased by $4.2 million, or 14%, for 2014 as compared to 2013 due primarily to $5.2 million in lower costs associated with a decrease in product revenue, partially offset by a $1.1 million increase in spending on manufacturing support activities.

Gross margin decreased in 2014 as compared to 2013 due primarily to the increase in spending on manufacturing support activities allocated across lower revenue.

Operating Expenses

 

     Year Ended
December 31,
     Change  
     2013      2014      Amount      %  
     (dollars in thousands)  

Research and development

   $ 15,033       $ 14,410       $ (623      (4 )% 

Sales and marketing

     8,094         7,211         (883      (11 )% 

General and administrative

     2,677         2,356         (321      (12 )% 
  

 

 

    

 

 

    

 

 

    

Total operating expenses

   $ 25,804       $ 23,977       $ (1,827      (7 )% 
  

 

 

    

 

 

    

 

 

    

Research and Development . Research and development expense decreased $0.6 million as compared to 2013, due to a $0.9 million decrease in personnel-related costs associated with a reduction in headcount associated with the completion of certain development activities, partially offset by higher personnel-related costs in our international operations.

Sales and Marketing. Sales and marketing expense decreased $0.9 million, as compared to 2013, due primarily to a $0.8 million increase in personnel-related costs in connection with increased headcount and a $0.2 million increase in promotional and marketing costs that was more than offset by a decrease of $2.1 million in amortization of acquisition-related intangible assets, primarily customer backlog, which had an estimated useful life of 12 months, ending September 30, 2013. As a result, there was no amortization expense related to customer backlog in 2014.

General and Administrative. General and administrative expenses decreased $0.3 million, as compared to 2013, due primarily to lower consulting expenses.

Other Income (Expense), Net

 

     Year Ended
December 31,
     Change  
     2013      2014      Amount      %  
     (dollars in thousands)  

Interest expense

   $ (2,731    $ (864    $ 1,867         68

Other income (expense), net

     508         114         (394      (78 )% 
  

 

 

    

 

 

    

 

 

    

Total other income (expense), net

   $ (2,223    $ (750    $ 1,473         66
  

 

 

    

 

 

    

 

 

    

Interest expense decreased $1.9 million, as compared to 2013, due to lower interest rates charged on lower levels of outstanding debt.

 

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Other income (expense), net decreased $0.4 million, as compared to 2013, due primarily to a $1.0 million change in fair value of our preferred stock warrant liability offset primarily by a decrease of $0.3 million in bank fees.

Provision for Income Taxes

 

     Year Ended
December 31,
     Change  
     2013      2014      Amount      %  
     (dollars in thousands)  

Provision for income taxes

   $ 72       $ 140       $ 68         94

Provision for income taxes increased due to a higher level of taxes in a foreign jurisdiction.

Quarterly Results of Operations

The following tables set forth selected unaudited quarterly consolidated statements of operations data for each of the six quarters in the period ended June 30, 2015 as well as the percentage that each line item represents of revenue for each quarter. The information for each of these quarters has been prepared on a basis consistent with our audited consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, includes all adjustments of a normal, recurring nature that are necessary for the fair presentation of the results of operations for these periods. This data should be read in conjunction with our consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for the full year ending December 31, 2015 or any other period.

 

     Three months ended  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    March 31,
2015
    June 30,
2015
 
Quarterly results of operations:    (in thousands)  

Revenue (1)

   $ 10,730      $ 10,332      $ 10,034      $ 10,369      $ 9,690      $ 10,600   

Cost of revenue

     5,960        7,074        6,333        6,165        5,830        6,406   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     4,770        3,258        3,701        4,204        3,860        4,194   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Research and development

     4,328        3,591        3,456        3,035        2,964        3,132   

Sales and marketing

     1,761        1,872        1,735        1,843        1,977        2,086   

General and administrative

     591        579        639        547        848        822   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     6,680        6,042        5,830        5,425        5,789        6,040   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (1,910     (2,784     (2,129     (1,221     (1,929     (1,846
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

            

Interest expense, net

     (219     (203     (189     (253     (181     (305

Other income (expense), net

     45        (2     (38     109        (118     407   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     (174     (205     (227     (144     (299     102   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision of income taxes

     (2,084     (2,989     (2,356     (1,365     (2,228     (1,744

Provision for income taxes

     93        17        15        15        49        22   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (2,177   $ (3,006   $ (2,371   $ (1,380   $ (2,277   $ (1,766
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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(1) Includes revenue by product category as follows:

 

     Three months ended,  
     March 31,
2014
     June 30,
2014
     September 30,
2014
     December 31,
2014
     March 31,
2015
     June 30,
2015
 
     (in thousands)  

Legacy products

   $ 6,507      $ 3,789      $ 1,487      $ 1,222      $ 908      $ 830  

New products

     4,223         6,543         8,547         9,147         8,782         9,770   

 

     Three months ended  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    March 31,
2015
    June 30,
2015
 
Quarterly results of operations:    (as a percentage of total revenue)  

Revenue

     100     100     100     100     100     100

Cost of revenue

     56        68        63        59        60        60   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     44        32        37        41        40        40   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Research and development

     40        35        34        29        31        30   

Sales and marketing

     16        18        17        18        20        20   

General and administrative

     6        6        6        5        9        8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     62        58        58        52        60        57   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (18     (27     (21     (12     (20     (17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

            

Interest expense, net

     (2     (2     (2     (2     (2     (3

Other income (expense), net

     —          —          —          1        (1     4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     (2     (2     (2     (1     (3     1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision of income taxes

     (19     (29     (23     (13     (23     (16

Provision for income taxes

     1        —          —          —          1        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

     (20 )%      (29 )%      (24 )%      (13 )%      (23 )%      (17 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Our quarterly revenue decreased quarter over quarter for each of the periods presented, except for the three months ended December 31, 2014 and the three months ended June 30, 2015. For the three months ended December 31, 2014, revenue increased to $10.4 million as sales of new products increased with the commencement of mass production of design wins. Revenue increased to $10.6 million for the three months ended June 30, 2015 as sales of new products increased by approximately $1.0 million, due primarily to increased revenue from an IoT application. Our quarterly revenue for the first three quarters of 2014 was impacted by the significant interruption in our ability to supply sufficient legacy products to meet market demand discussed under “—Results of Operations” above.

Our gross profit has fluctuated historically from quarter to quarter primarily due to fluctuations in our revenue, except for the three months ended June 30, 2014. Gross profit declined in the three months ended June 30, 2014 to $3.3 million, primarily as a result of an increase in product costs of $2.0 million offset by a benefit of $1.3 million from sales of inventory previously written down along with a reduction in revenue of approximately $0.4 million.

Total operating expenses decreased quarter over quarter for each of the periods presented in 2014 due to lower personnel-related costs associated with a decrease in headcount as a result of lower product tapeout and other research and development activity. Total operating expenses increased to $5.8 million in the three months

 

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ended March 31, 2015 due primarily to an increase of $0.3 million in general and administrative costs due to higher compensation costs and higher accounting, tax, and audit fees. Total operating expenses increased to $6.0 million in the three months ended June 30, 2015 due to increases in sales and marketing expense associated with higher personnel-related costs due to increased headcount and in research and development expense due to an increase in product prototype costs.

Liquidity and Capital Resources

Since inception, we have funded our operations primarily with gross proceeds from the sale of an aggregate of $78.5 million of convertible preferred stock, $22.5 million of term debt associated with the acquisition of the certain flash memory product assets from Atmel Corporation. Our principal source of liquidity as of June 30, 2015 consisted of cash and cash equivalents of $6.5 million. We did not have any borrowing capacity available under our credit facility as of June 30, 2015. Our outstanding borrowings under this credit facility as of June 30, 2015 were $15.0 million. Substantially all of our cash and cash equivalents are held in the United States.

We believe our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs over the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced products and our costs to implement new manufacturing technologies. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Any additional debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

Our cash flows for the periods indicated were as follows:

 

     Year Ended December 31,     Six Months Ended
June 30,
 
         2013             2014             2014             2015      
     (in thousands)  

Cash flows provided by (used in) operating activities

   $ (689   $ (580   $ (184   $ (3,272

Cash flows provided by (used in) investing activities

     1,761        (760     (596     (107

Cash flows provided by (used in) financing activities

     10,531        (4,229     (2,331     4,038   

Cash Flows from Operating Activities

Our primary source of cash from operating activities has been from cash collections from our customers. We expect cash inflows from operating activities to be affected by increases in sales and timing of collections. Our primary uses of cash from operating activities have been for personnel costs and investments in research and development and sales and marketing. Net cash used in operating activities for the periods presented consisted of net losses adjusted for certain noncash items and changes in working capital. Within changes in working capital, changes in accounts receivable, inventory and accounts payable generally account for the largest adjustments, as we typically use more cash to fund accounts receivable and build inventory as our business grows. Increases in accounts payable typically provides more cash as we do more business with our contract foundries and other third parties, depending on the timing of payments.

During the six months ended June 30, 2015, cash used in operating activities was $3.3 million, primarily from a net loss of $4.0 million and a net change in our operating assets and liabilities of $0.9 million and non-cash charges of $1.7 million primarily related to depreciation and amortization.

 

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During the six months ended June 30, 2014, cash used in operating activities was $0.2 million, primarily from a net loss of $5.2 million partially offset by a net change in our operating assets and liabilities of $3.4 million and non-cash charges of $1.6 million primarily related to depreciation and amortization.

During the year ended December 31, 2014, net cash used in operating activities was $0.6 million, primarily due to a net loss of $8.9 million, partially offset by non-cash charges of $3.2 million, primarily depreciation and amortization and stock-based compensation, and a net change in our net operating assets and liabilities of $5.2 million. The change in our net operating assets and liabilities was primarily due to a $2.9 million decrease in inventory and a $2.9 million decrease in accounts receivable reflecting lower levels of revenue and a $0.8 million decrease in prepaid expenses and other current assets partially offset by a $1.2 million decrease in accounts payable primarily attributable to a reduction in wafer and other inventory purchases and timing of payments.

During the year ended December 31, 2013, cash used in operating activities was $0.7 million, primarily from a net loss of $8.2 million, non-cash charges of $4.4 million primarily related to depreciation and amortization and stock based compensation and a net increase in our net operating assets and liabilities of $3.0 million. The change in our net operating assets and liabilities was primarily due to a $6.5 million increase in accounts payable primarily attributable to inventory purchases and timing of payments, a $0.7 million increase in employee-related liabilities, and a decrease of $3.2 million in accounts receivable reflecting higher cash collections from customers partially offset by a $5.2 million increase in inventory in support of higher sales.

Cash Flows from Investing Activities

Our investing activities consist primarily of purchases of property and equipment. We expect to continue to make significant capital expenditures to support continued growth of our business. During the six months ended June 30, 2014 and 2015, cash used in investing activities was $0.6 million and $0.1 million, respectively, due to purchases of equipment. During the year ended December 31, 2014, cash used in investing activities was $0.8 million related primarily to the purchase of equipment. During the year ended December 31, 2013, cash provided by investing activities was $1.8 million, related to the increase in restricted cash of $4.0 million, partially offset by purchase of equipment of $2.2 million.

Cash Flows from Financing Activities

Cash flows from financing activities primarily include net proceeds from issuance of convertible preferred stock and proceeds and payments related to our term loans and our credit facilities.

During the six months ended June 30, 2015, cash provided by financing activities was $4.0 million due to proceeds from our term loan facility partially offset by payments on our prior credit facility.

During the six months ended June 30, 2014, cash used in financing activities was $2.3 million, due primarily to principal payments on our outstanding borrowings.

During the year ended December 31, 2014, cash used in financing activities was $4.2 million, due primarily to $6.9 million in principal payments on outstanding borrowings offset by proceeds of $2.7 million from additional borrowings under our prior credit facility.

During the year ended December 31, 2013, cash provided by financing activities was $10.5 million, consisting of $17.4 million in net proceeds from issuance of convertible notes payable, convertible preferred stock and exercises of stock options, and $14.9 million in proceeds from a new term loan facility, offset by $21.7 million in principal payments on loan obligations.

Off Balance Sheet Arrangements

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have

 

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been established for the purpose of facilitating off balance sheet arrangements or other contractually narrow or limited purpose.

Credit Facility

In April 2015, we entered into a three-year $15.0 million credit agreement, or the new term loan facility, which replaced our prior senior secured revolving credit and term loan facility. The agreement provides for a senior secured term loan facility, in an aggregate principal amount of up to $15.0 million to be used for general corporate purposes including working capital, to repay certain indebtedness and for capital expenditures and other expenses. Interest will accrue on any outstanding borrowings at a rate equal to (a) the higher of (i) the prime rate (as publicly announced from time to time by the Wall Street Journal) and (ii) 3.25% plus (b) (i) 1.00% if our cash and cash equivalents are greater than 125% of the outstanding principal of our borrowings under the new term loan facility, or (ii) 2.00% if our cash and cash equivalents are less than or equal to 125% of such borrowings. Indebtedness we incur under this agreement is secured by substantially all of our assets and contains financial covenants requiring us to maintain a monthly asset coverage ratio of not less than 1.00 to 1.00 through September 30, 2015 and 1.10 to 1.00 thereafter, and quarterly adjusted EBITDA (measured on a trailing three-month basis) of $1 through March 31, 2016 and increasing to higher levels thereafter. These financial covenants are substantially similar to the ones in our prior credit facility. The agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, merge or consolidate and make acquisitions. Upon an occurrence of an event of default, we could be required to pay interest on all outstanding obligations under the agreement at a rate of five percent above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement. As of June 30, 2015, we were in compliance with all financial covenants and restrictions and had borrowings of $15.0 million outstanding. We may not draw additional funds under the new term loan facility and our borrowings mature on April 30, 2018.

Contractual Obligations and Commitments

The following is a summary of our contractual obligations and commitments as of December 31, 2014:

 

            Payments Due by Period  
Contractual Obligations    Total      Less than
1 Year
     1 - 3
Years
     3 - 5
Years
     More than
5 Years
 
     (in thousands)  

Operating leases (1)

   $ 225       $ 225       $ —         $ —         $ —     

Inventory-related commitments (2)

     4,260         4,260         —           —           —     

Financing arrangements (3)

     11,497         8,396         3,101         —           —     

Capital leases (4)

     75         75         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 16,057       $ 12,956       $ 3,101       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Operating leases primarily relate to our leases of office space with terms that would have expired in July 2015.
(2) Represents outstanding purchase orders for wafer commitments and component and assembly commitments that we have placed with our suppliers as of December 31, 2014.
(3) Financing arrangements represent debt maturities under our prior credit facility. See note 5 to the notes to our consolidated financial statements. We repaid in full and terminated this credit facility in April 2015 and entered into a new term loan in April 2015.
(4) Capital lease obligations relate to the lease of certain equipment with terms that expire in 2015.

As of December 31, 2014 we had a liability of $0.1 million for uncertain tax positions.

In April 2015, we entered into a three-year $15.0 million term loan facility, which replaced our prior credit facility. As of June 30, 2015, we had borrowings of $15.0 million outstanding under our new term loan facility. See “—Credit Facility” above. In June 2015, we extended our existing headquarters lease by six months. As a result of entering into this extension, our operating lease obligations increased by $0.2 million under the columns captioned “Total” and “Less than 1 year.”

 

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Internal Control Over Financial Reporting

Prior to this offering we were a private company and have had limited accounting and financial reporting personnel and other resources with which to address our internal controls and procedures. In connection with the audits of our consolidated financial statements as of and for the years ended December 31, 2013 and 2014, we identified a material weakness in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board (United States). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. The identified material weakness related to our lack of sufficient, qualified personnel in accounting and financial reporting functions with sufficient experience and expertise with respect to the application of GAAP and related financial reporting, which led to a delay in the closing of our books and resulted in a number of post-closing adjustments to our consolidated financial statements as of and for the years ended December 31, 2013 and 2014.

Our management and independent registered public accounting firm did not and were not required to perform an evaluation of our internal control over financial reporting as of and for the years ended December 31, 2013 and 2014 in accordance with the provisions of the JOBS Act.

We are in the process of taking steps intended to remedy this material weakness in our internal control over financial reporting identified by our independent registered public accounting firm. Since the material weakness relates at least in part to inadequate staffing, we plan to address it through the hiring of additional personnel in addition to other steps approved by our audit committee. We will not be able to assess whether the steps we are taking will fully remedy the material weakness until we have fully implemented them and a sufficient time passes in order to evaluate their effectiveness. If we fail to further increase and maintain the number and expertise of our staff for our accounting and finance functions and to improve and maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results accurately and prevent fraud. In addition, we cannot be certain that any such measures we undertake will successfully remediate the material weakness or that other material weaknesses and control deficiencies will not be discovered in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the trading price of our common stock to decline. As a result of such failures, we could also become subject to investigations by the NASDAQ Stock Market, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources. See “Risk Factors—If we fail to make necessary improvements to address a material weakness in our internal control over financial reporting identified by our independent registered public accounting firm, we may not be able to report our financial results accurately and timely or prevent fraud, any of which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the trading price of our common stock to decline.”

Critical Accounting Policies and Estimates

Our consolidated financial statements and the related notes included elsewhere in this prospectus are prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on our historical experience and various other assumptions that we believe are reasonable under the circumstances. Our actual results could differ materially from these estimates. To the extent that there are material differences between our estimates and our actual results, our future financial statements will be affected.

 

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The critical accounting policies involving judgments and estimate that we believe have the most impact on our consolidated financial statements are discussed below.

Revenue Recognition

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, transfer of title occurs, and the collectibility of the resulting receivable is reasonably assured. Due to the historical immaterial level of product returns under warranty, we do not record a reserve for estimated returns under warranty.

Generally, we meet these conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, we estimate and record provisions for future returns and other charges against revenue at the time of shipment, consistent with the terms of sale. We sell products to distributors at the price listed in our distributor price book. At the time of sale we record a sales reserve for ship from stock and debits, or SSDs, stock rotation rights and any special programs approved by management. We offset the sales reserve against revenue, producing the revenue amount reported in the consolidated statements of operations.

The market price for our products can be significantly different from the book price at which we sold the product to a distributor. When the market price, as compared to our original book price, of a particular distributor’s sales opportunity to their customers would result in low or negative margins for our distributor, we negotiate SSDs with the distributor. Management analyzes our SSD history to develop current SSD rates that form the basis of the SSD revenue reserve recorded each period. We obtain the historical SSD rates from our distributor’s records and our internal records.

We typically grant payment terms of between 30 and 60 days to our customers. Our customers generally pay within those terms. Distributors are invoiced for shipments at listed book price. When the distributors pay the invoice, they may claim debits for SSDs previously authorized by us when appropriate. Once claimed, we process the requests against prior authorizations and reduce reserves previously established for that customer.

The revenue we record for sales to our distributors is net of estimated provisions for these programs. When determining this net revenue, we must make significant judgments and estimates. We base our estimates on historical experience rates, the levels of inventory held by our distributors, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and our estimates. Our consolidated financial condition and operating results depend on our ability to make reliable estimates and we believe that such estimates are reasonable.

Inventories

We record inventories at the lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value. The carrying value of inventory is adjusted for excess and obsolete inventory based on inventory age, shipment history and the forecast of demand over a specific future period. At the point of loss recognition, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that new cost basis. The semiconductor markets that we serve are volatile and actual results may vary from forecast or other assumptions, potentially affecting our assessment of excess and obsolete inventory which could have a material effect on our results of operations.

Accounting for Income Taxes

We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements, but have not been reflected in our taxable income. Valuation allowances are established to reduce deferred tax assets as necessary when in management’s estimate, based on available objective evidence, it is more likely than not that we will not generate sufficient taxable income in future periods to realize the benefit of our deferred tax assets. We include interest and penalties related to unrecognized tax benefits in income tax expense. We recognize in our consolidated financial statements the impact of a tax

 

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position that based on its technical merits is more likely than not to be sustained upon examination. The valuation allowance as of December 31, 2014 was approximately $29.7 million.

Stock-based Compensation

Stock-based compensation costs related to stock options granted to employees are measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. We recognize compensation costs for awards with service and performance vesting conditions on an accelerated method under the graded vesting method over the requisite service period of the award. For stock options with no performance condition, we recognize compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term of four years.

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

The assumptions used in our option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, so that they are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

These assumptions are estimated as follows:

 

    Fair Value of Common Stock . Because our stock is not publicly traded, we must estimate its fair value, as discussed in “Common Stock Valuations” below.

 

    Risk-Free Interest Rate . We base the risk-free interest rate used in the Black-Scholes valuation model on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term of the options for each option group.

 

    Expected Term . The expected term represents the period that our stock-based awards are expected to be outstanding. Because of the limitations on the sale or transfer or our common stock as a privately held company, we do not believe our historical exercise pattern is indicative of the pattern we will experience as a publicly traded company. We have consequently used the Staff Accounting Bulletin, or SAB 110, simplified method to calculate the expected term, which is the average of the contractual term and vesting period. We plan to continue to use the SAB 110 simplified method until we have sufficient trading history as a publicly traded company.

 

    Volatility . We determine the price volatility factor based on the historical volatilities of our peer group as we did not have a sufficient trading history for our common stock. Industry peers consist of several public companies in the technology industry that provide similar services with comparable characteristics including enterprise value, risk profiles and position within the industry. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

 

    Dividend Yield . The expected dividend assumption is based on our current expectations about our anticipated dividend policy. We currently do not expect to issue any dividends.

In addition to assumptions used in the Black-Scholes option-pricing model, we must also estimate a forfeiture rate to calculate the stock-based compensation for our awards. We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to

 

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accumulate additional data, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense.

The fair value of the employee stock options was estimated using the following assumptions for the periods presented:

 

     Year Ended
December 31,
    Six Months Ended
June 30, 2015
 
         2013             2014        

Expected term (in years)

     6        6        5   

Risk-free interest rate

     1.06     1.84     1.62

Volatility

     63     67     70

Dividend yield

     —       —       —  

For the years ended December 31, 2013 and 2014 and for the six months ended June 30, 2014 and 2015, stock-based compensation expense was $0.2 million, $0.2 million, $0.1 million and $0.1 million respectively. As of June 30, 2015, we had approximately $0.6 million of total unrecognized compensation expense, net of related forfeiture estimates, which we expect to recognize over a weighted-average period of approximately 2 years. The intrinsic value of all outstanding options as of June 30, 2015 was $6.8 million based on the estimated fair value of our common stock of $11.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus.

Common Stock Valuations. Our board of directors intends all options granted to be exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant. The estimated fair value of our common stock was determined at each valuation date in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our board of directors, with the assistance of management, developed these valuations using significant judgment and taking into account numerous factors, including developments at our company, market conditions and contemporaneous independent third-party valuations.

Depending on whether stock options were granted near periods in which we also had a preferred stock issuance, the valuations of our common stock were back-solved for the common stock equity value using the Option Pricing Method, or OPM, the multi-period discounting method and the probability-weighted expected return method, or PWERM, or a combination thereof.

The OPM treats the rights of the holders of preferred and common stock as equivalent to call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of preferred stock, as well as their rights to participation and conversion. Thus, the estimated value of the common stock can be determined by estimating the value of its portion of each of these call option rights.

The multi-period discounting approach values the business based on the future benefits that will accrue to it, with the value of future benefits discounted back to a present value at an appropriate discount rate. The discounted cash flow analysis forecasts future revenue and free cash flow, or net operating profit after tax from continuing operations, associated with that revenue.

The PWERM is a scenario-based analysis that estimates the value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to us, as well as the economic and control rights of each stock class.

Following the closing of this offering, the fair value of our common stock will be determined based on the closing price of our common stock on the NASDAQ Global Market.

 

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Repricing of Options. During the year ended December 31, 2014, we repriced a total of 387,749 outstanding options by way of amending existing outstanding option grants with exercise prices greater than $1.65 per share such that the new exercise price is $1.65 per share. Except for the change in exercise price, all other terms of the options did not change, including the contractual term, vesting schedule and the vesting start date. As a result of such modification, we expensed incremental stock compensation on the date of modification of $0.1 million relating to options that were already vested. An additional $0.1 million relating to the options that were unvested will be expensed over the remaining vesting term.

JOBS Act

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to irrevocably “opt out” of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards, but we intend to take advantage of the other exemptions and reduced reporting requirements provided by the JOBS Act, including without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and complying with any requirement that may be adopted regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). These exemptions will apply until the earliest to occur of: the last day of the first fiscal year in which we have more than $1.0 billion in annual revenue; the date we qualify as a “large accelerated filer,” with at least $700 million in market value of common equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2014-09 regarding ASC Topic 606—Revenue from Contracts with Customers. The standard provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for us in the first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within the guidance; or (ii) retrospective with the cumulative effect of initially applying the guidance recognized at the date of initial application and providing certain additional disclosures as defined per the guidance. Early adoption is not permitted. We are currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in the timing and content of footnote disclosures than under today’s guidance. ASU 2014-15 is effective for us in the first quarter of 2016 with early adoption permitted. We do not believe the impact of adopting ASU 2014-15 will be material to our consolidated financial statements and disclosure.

 

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Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include foreign exchange rate and interest rate sensitivities as follows:

Foreign Currency Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.

The majority of our revenue is denominated in U.S. dollars. Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States and to a lesser extent in EMEA and APAC. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchanges rates applicable to our business would not have a material impact on our historical consolidated financial statements.

We have not hedged exposures denominated in foreign currencies or used any other derivative financial instruments. Although we transact the substantial majority of our business in U.S. dollars, future fluctuations in the value of the U.S. dollar may affect the competitiveness of our products and thus may impact our results of operations and cash flows.

Interest Rate Sensitivity

We had cash and cash equivalents of $6.5 million as of June 30, 2015, consisting of bank deposits and money market funds. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant. We also had total outstanding debt of $15.0 million as of June 30, 2015. The outstanding debt relates to a term loan.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. Our exposure to interest rates relates to the change in the amounts of interest we must pay on our variable rate borrowings. A hypothetical 10% increase in our borrowing rates would not have a material impact on interest expense on our principal balances as of June 30, 2015.

 

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BUSINESS

Overview

We are a leading provider of application-specific, feature-rich, ultra-low power non-volatile memory products. We optimize our non-volatile memory products for Internet of Things, or IoT, applications including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets. We combine our non-volatile memory design capabilities with proprietary intellectual property and differentiated technology platforms to deliver high-performance products that dramatically reduce the overall energy consumption of our customers’ systems and extend battery life. Our products feature embedded intelligence in a small form factor and high reliability. We believe that our ultra-low power and feature-rich non-volatile memory products will become a key hardware building block for billions of IoT edge devices operating on and connected to networks worldwide. Through December 31, 2014, we have shipped over 200 million units to more than 500 end customers, 59 of which are large multi-national companies.

Our non-volatile memory, or NVM, product families include DataFlash, Fusion Flash and Mavriq. Our DataFlash family of products is well-suited for data-logging applications, such as fitness trackers and sensors, and allows for system simplification. Our Fusion Flash family of products offers the ability to function at a wide range of voltages and battery charge levels, which extends the useful battery life of our customers’ systems. Our Mavriq family of products utilizes our proprietary Conductive Bridging RAM, or CBRAM, technology and is ideally suited for applications that require high-performance while consuming 1/10th to 1/100th the energy of existing flash memory products. We believe the power and speed advantages of our products have enabled us to become a preferred NVM provider to customers demanding a combination of exceptional battery life, energy efficiency, reliability and low cost.

We sell our products directly to leading original equipment manufacturers and original design manufacturers, or OEMs and ODMs, respectively, that manufacture products for our end customers. In general, we work directly with our customers to have our NVM devices designed into and qualified for their products, which we refer to as design wins. The number of design wins has grown from 32 in 2013 to 65 in 2014 and to 115 in the nine months ended September 30, 2015, including 6, 63 and 109 design wins for new products, respectively. Although we maintain direct sales, support and development relationships with our customers, most of our products are sold to those customers through distributors.

As of June 30, 2015, we had 84 employees, approximately 60% of whom are engaged in research and development. Our headquarters are located in Sunnyvale, California, with additional sales operations in North America, EMEA and APAC regions. For the years ended December 31, 2013 and 2014, we recorded revenue of $49.7 million and $41.5 million, and a net loss of $8.2 million and $8.9 million, respectively. In addition, our revenue decreased from $21.1 million during the six months ended June 30, 2014 to $20.3 million during the six months ended June 30, 2015 and our net loss decreased from $5.2 million to $4.0 million over that same period. In 2012, we purchased certain flash memory product assets from Atmel Corporation. Since the acquisition, we improved certain features of the acquired products, enhanced their capabilities for low-power IoT applications, accelerated development of other select products, and introduced our next-generation DataFlash and Fusion Flash products based on the acquired technology, which we refer to as our new products. Revenue from new products grew from $6.0 million in 2013 to $28.5 million in 2014, and we generated $18.6 million in revenue from new products during the six months ended June 30, 2015.

Industry Background

The Internet of Things (IoT)

Historically, innovation in the semiconductor industry has been driven by end user demand for increasingly higher performance, lower cost, more compact and energy efficient devices from computer systems to communication networks to mobile devices and now to any physical device, or “thing.” The Internet, together with advances in low-cost, high-speed connectivity and declines in the cost and size of sensors, processors and

 

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communication modules, has enabled a network of interconnected devices used in all manner of purposes, including communication, entertainment, industrial applications, medicine, retail and business. We believe that IoT has the potential to impact every industry and could represent a major transformation as great as the Internet itself. Everyday consumer devices and industrial equipment, from wearables and health monitors to smart meters and environmental sensors, can now connect to the Internet, enabling information gathering and management of these devices over a connected network, allowing businesses to increase efficiency, acquire intelligent data and enable new services and business models. The “edge of IoT” includes all devices at the end-points of this vast network of computing systems that interface with the physical world across a wide variety of devices, such as small wearable technologies, smartphones, household appliances, environmental sensors, smart automobiles and industrial meters. The perimeter of this vast IoT network consists of the so-called “IoT edge nodes,” or IoT nodes. A typical construct of these nodes include a sensor to collect information from the real world, a microcontroller to manage and process the collected data, a communication unit for connectivity and memory to store code and data locally on the node.

The sensors, microcontrollers, radios and memories that are embedded in these IoT nodes, which we also refer to collectively as system components, need to take up less space and communicate with each other and the physical world over connected networks and to do so while consuming less energy than ever before. A fundamental design challenge for IoT devices is how to satisfy the lower energy requirements of small devices while increasing their processing performance, connectivity, speed, and intelligence. Addressing this challenge will require new designs for the system components of these devices.

While other factors, such as connectivity, reliability, affordability and security, will be important to the adoption of IoT, energy efficiency will be critical for IoT to achieve its full potential as it will enable a new class of IoT devices: those without a frequent power connection. The growth of the IoT market will depend on advancements in the power and energy efficiency, connectivity, reliability, cost and security of each system component within an IoT device. Memory is integral to IoT device systems and reducing the energy consumption of memory while enabling increased read/write performance can help reduce the overhead of other components within the device. With greater energy efficiency, we believe further technological advancements in energy harvesting and battery life will enable IoT devices to operate for several years without maintenance or battery replacement, supporting billions of always-on, interconnected, intelligent devices operating autonomously and communicating via the Internet. Gartner estimates that the installed base of IoT devices will exceed 25 billion units in 2020, up from approximately 4 billion units in 2014, representing a compound annual growth rate, or CAGR, of 38%.

 

 

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The Market for Non-Volatile Memory

NVM is the primary semiconductor system component used to store and access software code and digital content. Currently, the NVM market consists of two major flash memory architectures: NAND flash memory and NOR flash memory. Both of these memories are built on industry-standard “floating gate” technology, which was commercialized in the early 1970s. These two flash memory devices are distinguishable by their internal architectures and the corresponding applications they are designed to serve. NAND flash memory, which has faster write and slower read speeds, is well-suited for mass storage and data-heavy applications, such as solid state and USB drives. NOR flash memory, which has fast read speeds, is well-suited for code storage and execution of commands by the system processor and is used for a broader set of applications where high-performance and reliability are important, such as in appliances, industrial and automotive applications, display controllers, handsets and set-top boxes. Customers seeking fast read performance and superior reliability currently rely on NOR flash memory. The majority of applications for IoT nodes do not require high memory capacity for storage. For example, while the typical environmental sensor node does not need to store massive amounts of data, it does require NVM that is reliable, provides fast read access, and can operate at very low energy to conserve battery power and prolong battery life. As such, a NVM is better suited for a large number of IoT applications. In this prospectus, unless the context indicates otherwise, we refer to the market for our products, which compete primarily with NOR flash memory products, as the NVM market.

In general, NVM devices are designed as either commodity devices or as specialty devices. As compared to commodity devices, specialty memory devices have enhanced features that optimize the performance of the specific applications they serve and hence tend to command a higher price and better margins. NVM can enable systems requiring integrated functionality in a small form factor, high mobility, high reliability and reduced energy consumption. Web-Feet Research estimates that the NVM segment represents a $1.7 billion market opportunity in 2015, growing to $2.7 billion by 2019, representing a 12% CAGR. This growth is largely driven by the demand for NVM in IoT devices, which is expected to grow from $0.7 billion in 2015 to $1.7 billion in 2019, representing a 25% CAGR.

 

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Next-Generation Memory Requirements for IoT

We believe that the requirements of the IoT market create fundamentally new technological challenges, necessitating the development of new and innovative features, architectures and core silicon technology platforms for NVM devices used in IoT nodes. Without these innovations, we believe that the NVM components of these nodes will be unable to reliably deliver the necessary performance, energy efficiency and cost requirements demanded by the IoT market. Legacy commodity memory products are designed to maximize storage capacity per

 

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area, serving the needs of the PC, communication and storage end markets. In contrast, the utility of IoT devices are typically less dependent on storage capacity and more reliant on their ability to perform tasks while using very little

energy. In addition, these devices require high reliability and integrated functionality in a small form factor. Accordingly, we believe IoT edge nodes will require a NVM product with the following features:

 

    Ultra-low energy operation. Controllable IoT nodes will need to operate for a long duration, in some cases several months or even years, without having to change batteries. This extended battery life will be enabled by reducing the energy consumption of the components in the IoT node, including the memory components used to store data and code.

 

    High reliability . IoT devices, such as industrial and environmental sensors, must be highly reliable in order to avoid the costs associated with frequent replacements and system failures. The use of efficient components and simplified firmware in IoT nodes can increase reliability and decrease total cost of ownership of IoT devices.

 

    Embedded intelligence in a small form factor. To drive smaller footprints and reduce component count for integration across form factors such as wearables, appliances and sensors, NVM system components must have intelligent functionality, such as the ability to manage the energy use of the device, beyond simple storage, in a small form factor.

Legacy NVM products are limited in their ability to address these needs. We believe an opportunity exists for an entirely new generation of NVM solutions to serve the unique needs of the IoT market.

Our Solutions

We provide innovative, application-specific products designed to address the requirements of emerging IoT applications, including low energy consumption, high reliability and embedded intelligence in a small form factor. Legacy and commodity NVM products are limited in their ability to address these design challenges, particularly the low energy consumption design requirements. Our products address these challenges, enabling customers to better realize the full potential of IoT through extended battery life and better performance and reliability.

We offer three product families, DataFlash, Fusion Flash and Mavriq, which are manufactured using two technology platforms: industry-standard floating gate technology and our proprietary CBRAM technology. Our products have unique features and architectures and deliver the following system-level benefits to our customers:

 

    Extended battery life. We optimize our products to operate at a wide voltage range and can continue to operate even as the battery discharges and reaches very low power levels, where commodity NVM devices typically fail. Operating intelligence, such as low power mode, is designed into our products to help systems save energy. For example, in a typical IoT application, where the vast majority of battery life is consumed in standby mode, our 4Mb Fusion family NVM products can reduce the standby power requirements by a factor of 2-5x as compared to similar commodity NVM, extending battery life.

 

    Enhanced functionality and reliability. Our components allow for greater storage efficiency than competing NVM products in logging small packets of data for IoT. This reduces microcontroller unit burden on system resources and allows for less frequent re-write cycles, enabling dramatic increases in battery life and enhancing the reliability of the flash memory components. For example, using our DataFlash family in a typical data-logging application, a customer can reduce the frequency of re-write cycles, which we believe could significantly extend the endurance of the NVM used in the system.

 

   

System simplification and lower total cost of ownership. By incorporating power management features in our NVM products, our customers could reduce the number of components included in and the overall footprint of their systems, thereby lowering the total cost of their systems. For example, our wide voltage products reduce the need for ODMs to incorporate a power management chip in their

 

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designs. For IoT devices with a small physical footprint, the ability to eliminate components can generate significant cost reduction and scaling benefits.

Our Competitive Strengths

We believe the following attributes and capabilities provide us with several competitive advantages:

 

    Purpose-built memory solutions for specific applications, including IoT. We believe our new products represent significant advances in NVM memory solutions, with their multiple layers of innovation and differentiated feature sets and chip architectures. They feature a combination of ultra-low energy consumption, an efficient, high-performance interface and a high level of integration. As such, our new products are able to address a wide variety of specialty applications and, we believe, are ideally suited to the requirements of the IoT market. Our revenue from these new products increased from $6.0 million to $28.5 million in the years ended December 31, 2013 and 2014, respectively, and from $10.8 million during the six months ended June 30, 2014 to $18.6 million during the six months ended June 30, 2015.

 

    Large, diversified and global customer base . In 2014, our products were sold to more than 500 end customers of varying sizes for use across multiple industry applications, including next-generation connected appliances, wearables, sensors and medical devices. More than 400 of our end customers purchased new products in 2014, including more than 100 that purchased both new and legacy products. We have also secured a number of reference design wins for Bluetooth 4.0 applications. No end customer accounted for 10% or more of our revenue in 2013 or 2014 and more than half our revenue for the year ended December 31, 2014 was generated by over 50 end customers that purchased our products directly or through distributors. In 2014, approximately 54% of our revenue was generated from sales of our products to three independent, non-exclusive distributors. Our customer base provides us with an opportunity to earn more business through follow-on sales and design wins.

 

    Close collaboration and relationships with customers and industry participants for future products . Through our close relationships with customers, including leading OEMs and ODMs, we gain valuable insights into critical product design, development and production timelines, product roadmaps and next-generation memory design requirements to meet the needs of future products. These relationships serve to our advantage because once our NVM products are designed into customers’ products, we believe that it becomes difficult to replicate the benefits our differentiated technology provide using competing products. Further, our system-level engineers engage with customers to help them develop targeted solutions that commodity memory suppliers typically do not provide. In addition, our field application engineering team provides customers with design support capabilities, enabling OEMs and ODMs to effectively deploy our NVM solutions across their product portfolios.

 

    Highly innovative CBRAM technology platform. Our CBRAM technology, which we believe is the first new memory process technology commercialized in the last 15 years, offers dramatic improvements in energy efficiency, performance and cost over industry-standard floating gate NVM technology. This platform technology enables us to build highly differentiated products for customers and provides us licensing opportunities to OEMs, ODMs and foundries for embedding our CBRAM technology. Since inception, we have focused on building a strong intellectual property position in this area, and now have over 170 patents and patent applications relating to our CBRAM technology.

Our Strategy

Key elements of our strategy include:

 

   

Maintain application-specific product design focus . We plan to continue to work closely with our customers’ system design, engineering and procurement groups to understand their requirements and create NVM feature sets that address the needs of their specific products and applications. These solutions are not custom designed for specific customers, but are instead application-specific, and therefore can be used by multiple customers for similar applications. As a result, we can easily

 

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integrate our products into devices with similar requirements. Our application-specific NVM products are highly scalable and cost-effective and meet the needs of a broad customer base, creating the potential for high-volume sales. This strategy differentiates us from commodity memory providers that compete primarily based on cost and availability.

 

    Continue to build on design wins . We plan to continue to engage and build strong relationships with customers to obtain design wins. We define a design win as the successful completion of the evaluation stage, where a customer has tested our product, verified that it meets their requirements and qualifies our NVM devices for their products. The number of our design wins has grown from 32 in 2013 to 65 in 2014 and to 109 in the nine months ended September 30, 2015, including 6, 63 and 109 design wins for new products, respectively. Through the expansion of our salesforce and our continued collaboration with customers, we expect to build on this momentum. We also work with leading OEMs and ODMs to incorporate our application-specific NVM solutions into and qualify our products for their reference designs, which we refer to as reference design wins. We believe securing reference design wins is an effective way of increasing our presence in the end markets we serve because these designs may be used by many end customers across multiple applications.

 

    Achieve leadership position in our target markets through the continued release of new products optimized to address customer-specific requirements . Through the continued development and enhancement of our feature-rich NVM products and technologies designed to meet evolving customer requirements, we intend to achieve a leadership position in a broad range of vertical markets impacted by the emergence of IoT, such as wearables in the consumer market and sensors in the industrial market. Leveraging our architectural and design expertise, we intend to enhance existing and introduce new product families based on both of our manufacturing platforms. We believe that continued investment in our technology platforms will enable us to advance the features and performance of our low-power memory solutions, further strengthening our technological leadership.

 

    Expand our manufacturing capabilities. We intend to scale our manufacturing capabilities by working with additional foundries that will allow us to support higher volumes and access a broader base of potential customers. These additional foundries also provide advanced technologies that enable us to reduce costs, facilitate the integration of a broader set of product features and enhance our ability to pursue our CBRAM licensing strategy. We believe having our products manufactured by leading manufacturing partners will also help us promote adoption of our products by their existing customer base and penetrate new markets.

 

    Pursue CBRAM licensing opportunities. In addition to sales of our CBRAM-based products, we intend to monetize our proprietary CBRAM platform by licensing our technology to OEMs, ODMs integrated device manufacturers, fabless semiconductor companies and foundries focused on embedding our technology in their current and future solutions. As of June 30, 2015, we had licensing arrangements with three semiconductor companies to include our CBRAM technology in their products or embedded applications. Through the licensing of our CBRAM technology, we expect to expand the presence of the CBRAM platform, enabling our CBRAM technology to address a broad range of applications and end markets.

Our Technology

Our three product families are based on multiple layers of innovation and differentiation arising from feature sets and architectures that are built on two fundamental silicon technology platforms: industry-standard floating gate and our proprietary CBRAM. We believe these areas of differentiation enable us to address the specific needs of the IoT market.

 

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We offer over 200 products across our three product families. Each product family utilizes technologies that differentiate it from competing commodity products and provides value to our customers.

As shown in the diagram below, our DataFlash and Fusion Flash product families, which are based on floating gate technology, utilize different architectures, as compared to commodity NVM devices.

 

 

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Key components of our DataFlash and Fusion Flash architectures include small page write operation, auto-erase and ultra-deep power down modes to reduce standby energy consumption. Both families also include wide voltage input-output interface, which helps extend battery life. In addition, our DataFlash family incorporates dual static random access memory, or SRAM, buffers that enable utilization of a single, very low pin-count memory device for all NVM needs related to data and code storage, reducing the overall required footprint of the system.

These product families also contain smart features that reduce power requirements and improve system efficiencies. A distinguishing feature of our DataFlash family is its byte-write capability, which does not require it to re-write entire pages of data as standard commodity devices do today. With our DataFlash products, programmers issue a single software command to erase/write a single byte, which differs from standard NVM

 

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products that require erasing an entire block to record new data. With our products, less memory management is required from the host controller, freeing it for higher priority operations. Less memory management also allows for a smaller software footprint in the controller’s SRAM and the flexibility to use a smaller microcontroller or eliminate the need for an external SRAM. This feature also reduces microcontroller overhead, significantly reducing energy consumption and increasing reliability.

CBRAM Technology Platform

We believe CBRAM is a disruptive technology platform that will help unlock the full potential of IoT. CBRAM technology utilizes a fundamentally different method of storing information in a chip compared to the floating gate approach. CBRAM memory cells store information at higher speeds while utilizing significantly lower energy compared to other technologies commonly used today. Furthermore, CBRAM requires fewer manufacturing steps than floating gate technologies, which can lower its production cost.

Today, information storage in flash memory devices is based on the principle of capacitive storage of an electric charge in a floating gate transistor, which modulates the electrical conductivity of the transistor channel between a more conductive and less conductive state. Sensing this modulation and subsequent interpretation by the control circuitry of the chip results in identification of digital state “1” or digital state “0.” From the early 1990s through 2008, the storage capacity of commercial flash memory devices based on floating gate technology has increased at a rate consistent with Moore’s law. However, we believe little has changed in the energy consumption and performance of memory products built on this technology. For example, despite a more than 100x improvement in density, an NVM product introduced in the early 1990s built on 350 nanometer floating gate technology writes a byte of data at a similar speed and consumes a comparable amount of energy as a more current NVM product built on 65 nanometer floating gate technology.

In contrast, our CBRAM technology is based on completely different physics for storing information. The basic storage element of our CBRAM-based products consists of an access transistor and a programmable resistor. Information storage occurs as a result of the creation and removal of an electrochemically induced nanoscale conductive link in a dielectric inserted between two electrodes. Insertion of CBRAM technology in a standard CMOS process is simpler than inserting floating gate technology. As shown in the diagram below, CBRAM’s storage element is the simple layer that is inserted between the metal interconnects of a standard CMOS process. By comparison, the storage element for floating gate technology is a more complex structure requiring many additional masking steps and process modules.

CBRAM Memory Platform vs. Traditional Floating Gate Memory Platform

 

 

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As a result of the benefits this platform technology provides, our current CBRAM-based product family, Mavriq, is able to operate at significantly lower voltage and with better performance. We believe that the scaling benefits of CBRAM-based products will allow them to be manufactured at lower cost than floating gate NVM.

 

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The diagram below shows the architectural differentiation of the Mavriq family versus commodity floating gate NVM.

 

 

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Our Mavriq product family incorporates the above architectural features built on our proprietary CBRAM technology platform and enables us to create feature-rich products ideally suited for IoT and other next-generation applications. The Mavriq family of products is designed with standard functionality and is pin-to-pin compatible with existing solutions, which allows for easy integration into existing processes. These products also operate at lower energy and deliver higher performance than commodity solutions, making them ideally suited for devices that require ultra-low power.

Our Products

Our products offer different feature sets and architectures and are organized into three product families based on two silicon technology platforms: floating gate and our proprietary CBRAM.

Floating Gate-based Products

DataFlash. Our DataFlash family of NVM products contains smart features that reduce power requirements and improve system efficiencies, and is especially well suited for data-logging applications, such as industrial automation, home automation sensing and health and fitness tracking.

Fusion Flash. Our Fusion Flash product family combines industry-standard sector sizes and read/write commands with new features, such as wide voltage, ultra-deep power down mode and flexible erase capability. The Fusion Flash family of memory products is designed for use in a wide variety of high-volume consumer applications, such as wearables, mobile and other applications requiring energy conservation and in which program code is copied from flash into embedded RAM for execution. Its features can extend the life of battery-operated devices, such as Bluetooth 4.0 products, DECT ULE (Ultra Low Energy) products, ZigBee RF4CE, Z-Wave and other Wi-Fi and Wi-Fi-direct applications.

Key features provided by our DataFlash and Fusion Flash product families include:

 

   

Ultra-deep power down. Both product families have special features to assist in system-level energy savings. The ultra-deep power down mode can be accessed via a simple software instruction by the

 

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system controller. The power down mode is measured in nanoamps, an order of magnitude better than competing products. Software control of power down allows the designer to eliminate extra hardware components that regulate voltage in a system such as low dropout voltage regulators, DC-DC converters or transistors, which add cost and complexity and can reduce reliability.

 

    Wide supply voltage range operation. Both product families offer the ability to operate under a wide supply voltage range, which is an important feature for battery operated systems. These products can run from unregulated power supplies to maximize battery life from as low as 1.65V to 3.6V uninterrupted, which are the most common voltages for these applications today. The ability to operate at wide supply voltage is enabled by integrating an internal power management block inside our devices. In comparison to commodity NVM devices, the extended voltage range can maximize the energy utilization from the battery by as much as 1000%, significantly enhancing the battery life of the product. This feature is especially well-suited for wearable, mobile, and other energy conscious devices, such as Bluetooth 4.0 products, DECT ULE (Ultra Low Energy), ZigBee RF4CE, Z-Wave and other Wi-Fi and Wi-Fi Direct devices.

In addition to the features described above, our DataFlash product family also has the following key feature:

 

    Byte-write capability. Our DataFlash product family, enabled by its dual SRAM buffer architecture, brings byte-write functionality to NVM devices. This functionality enables programmers to issue a single software command to erase/write a single byte, which differs from standard commodity NVM products that require a 4KB block erase. As such, the host controller can manage the NVM system resources with a much simpler stack. Less memory management resources also allows for a smaller software footprint in the controller’s SRAM, more resources available for higher priority operation and lower energy consumption. DataFlash provides system designers the flexibility to use a smaller microcontroller, or forego external SRAM altogether.

CBRAM-based Products

We intend to create several families of CBRAM-based products in addition to Mavriq, our initial CBRAM-based product family. We are currently working with several leading companies who are developing differentiated solutions for IoT and other emerging markets to define and develop our next family of products based on our proprietary CBRAM technology. We intend to release future product families based on customer feedback that incorporate many of the features currently used in our DataFlash and Fusion Flash families. CBRAM is implemented at the manufacturing level, allowing architectural and feature set enhancements, such as bit-write capability, to be introduced on top of the base CBRAM silicon layer.

 

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CBRAM-based products offer many advantages over NOR flash memory products built on floating gate technology, including:

 

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    Faster: ultra-fast byte-write capability. CBRAM-based products can write a byte of data at 10-100x the speed of floating gate products.

 

    Lower energy: low energy byte-write capability. CBRAM-based products can perform byte-write operation while consuming as little as 1/100th the energy and 1/5th the standby energy used by conventional floating gate products.

 

    Bit-write capability . CBRAM-based products utilize an architecture that allows single bit alterability. This allows more energy efficient operation in applications such as data-logging.

 

    Tolerant of extreme environments and hardened against ionizing radiation. Products built on our CBRAM-technology are capable of being used in applications which operate in extreme environments. For example, commodity memory devices have limited application in the medical field because they cannot survive the harsh thermal and radiation conditions imposed by the sterilization process, which can cause data corruption and data loss. Our Mavriq product family is a robust, embedded or stand-alone storage technology that can survive the extreme conditions of sterilization. Our specialty medical CBRAM products have passed both gamma and e-beam sterilization testing and are compatible across the sterilization conditions of heat, pressure and irradiation.

Customers

Our end customers include leading tier-1 OEMs and ODMs that use our products across multiple industries and applications, including next-generation Internet-connected appliances, wearables, smart meters, sensors and medical devices. We have also secured a number of reference design wins for Bluetooth 4.0 applications. During the year ended December 31, 2014, more than 500 end customers purchased our products. We generate a substantial amount of our revenue from sales of our products to three independent, non-exclusive distributors, which many of our end customers use as an alternative means of fulfillment to direct purchases from us. For the year ended December 31, 2014, sales of our products to Arrow Electronics, Avnet Inc. and ATM Electronic Corporation accounted for approximately 20%, 20% and 14% of our revenue. Revenue from these same distributors comprised 25%, 9% and 12% of our revenue for the year ended December 31, 2013, respectively. In addition, for the six months ended June 30, 2015, sales to Arrow Electronics represented 15% of our revenue. No other customers and

 

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no end customer accounted for 10% or more of our revenue in 2013, 2014 or for the six months ended June 30, 2015 and the substantial majority of our revenue for the year ended December 31, 2014 was generated by over 50 end customers.

Sales

We sell our products through our worldwide sales organization and through our channel of representatives and distributors to OEMs and ODMs. End customers primarily fulfill and procure product orders through our distribution partners. We have sales personnel covering three primary regions, the Americas, APAC and EMEA. We have sales personnel in North America, United Kingdom, Hong Kong, Singapore, South Korea and Taiwan.

Our typical sales cycle consists of a sales and development process involving our end customers’ system design, engineering and procurement groups and our system-level engineers that can last several months to a year. Successful sales cycles culminate in design and reference design wins. Our collaborative relationships with our customers enable us to understand their product designs and memory device requirements, which allow us to create solutions that are not custom designed for a specific customer and can be used by multiple customers in their products and, in some cases, to have customers design their products to match the unique features of our NVM solutions.

Manufacturing

We employ a fabless manufacturing business model and rely on third-party suppliers for all phases of the manufacturing process, including fabrication, assembly and testing. Our fabless business model allows us to leverage the expertise of industry-leading suppliers in such areas as fabrication, assembly, quality control and assurance, reliability and testing, and avoid the significant costs and risks associated with owning and operating such manufacturing operations. These suppliers also are responsible for procurement of raw materials used in the production of our products. As a result, we are able to focus our resources on product design, additional quality assurance, marketing and customer support.

Our engineers work closely with foundries and other contractors to increase yields, lower manufacturing costs and improve quality. In addition, we believe outsourcing our manufacturing and assembly activities provides us the flexibility needed to respond to new market opportunities, simplifies our operations and significantly reduces our capital requirements. We do not have a guaranteed level of production capacity from any of our suppliers’ facilities for the production of our DataFlash and Fusion Flash products. We carefully qualify each of our suppliers and their subcontractors and processes to ensure they meet our standards for quality and reliability.

We are committed to maintaining the highest level of quality for all of our products. Our overall objective is that all of our products meet customer requirements, are delivered on time and function reliably throughout their useful lives.

Wafer Fabrication

We currently manufacture the majority of our floating gate solutions in 110nm silicon wafer production process geometries utilizing the services of United Microelectronics Corporation in Taiwan. In early 2015, we commenced developing our first floating gate technology-based flash products in a 65nm process node at XMC, a foundry in Wuhan, China. Our CBRAM-based products are manufactured in 130nm silicon wafer production process geometries by Altis Semiconductor S.N.C., or Altis, in Corbeil-Essonnes, France. We are currently in discussions with a foundry in Asia to manufacture our next-generation CBRAM-based products on a 300mm fab.

Assembly, Testing and Wafer Probe

We maintain multiple sources for assembly and final testing of our products. However, Amkor Technology, Inc. in Taiwan, Korea, and the Philippines currently provides substantially all of our assembly and final test services. Our wafer probing is performed by King Yuan Electronics Co., Ltd. in Taiwan. We continually monitor

 

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the manufacturing and test of our products at all of our contractors to ensure that our manufacturing and testing procedures are properly implemented. As part of our total quality assurance program, our quality management system has been certified to ISO 9001:2000 standards. Our foundry vendors are also ISO 9001 certified.

Research and Development

We intend to continue to devote significant resources to develop new products and product families and integrate additional features and capabilities into our existing product offerings. We believe that our continued success depends on our ability to both introduce improved versions of our existing solutions and to develop new solutions for the markets that we serve. We have assembled an experienced team of engineers with core competencies in floating gate design and fabrication, CBRAM design and software development. Our memory design team has extensive experience in large-scale memory design, including process and device development, qualification and reliability, improving manufacturing yields and implementation and verification. The experience of our hardware design team enables us to effectively assess the tradeoffs and advantages when determining which features and capabilities of our solutions should be implemented. Through our research and development efforts, we have developed intellectual property and know-how that we are able to leverage across our products and end markets. Our research and development efforts are generally targeted at two areas:

 

    Floating gate technology platform . We intend to continue to invest in our architecture and design technology to further refine our technology platform with respect to overall form factor, product performance and application-specific optimization and to expand the platform to enable us to further develop our product offerings beyond what is currently achievable. We expect to introduce new product families based on 65nm floating gate technology.

 

    CBRAM technology platform. We intend to continue to invest in our CBRAM-based solutions. First, we intend to develop differentiated architecture, design and feature sets that will be implemented on our qualified CBRAM process with our existing foundry partner. Second, we plan to invest to establish our CBRAM manufacturing process in an advanced 300mm foundry to manufacture next generation products. We expect that both of these development activities will allow us to offer solutions not currently available in our Mavriq product family.

Through our research and development efforts, we intend to continually expand our portfolio of patents to enhance of our intellectual property position. As of June 30, 2015, we had a core team of 48 engineers involved in research and development, 29 of whom have advanced degrees, located in our research and development design center at our headquarters in Sunnyvale, California and at our facility in France.

For the years ended December 31, 2013 and 2014 and during the six months ended June 30, 2015, our research and development expense was $15.0 million, $14.4 million and $6.1 million, respectively.

Competition

Our solutions include features and capabilities that differentiate us from our competitors. In general our product lines are tailored to the needs of the IoT and specialty NVM markets. We believe our products provide significant value, and whether a customer will opt for our solution or a competitor’s, depends on their perceived value of our solution for their specific application.

The global semiconductor market in general and the semiconductor memory market in particular, are highly competitive. We expect competition to increase and intensify as more and larger semiconductor companies enter our markets. Increased competition could result in price pressure, reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue and operating results.

Currently, our competitors range from large, international companies offering a wide range of commodity NVM products to companies specializing in other alternative, specialized emerging memory technologies. Our

 

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primary competitors in the NVM market include Atmel Corporation, Macronix International Co. Ltd., Microchip Technology Inc., Micron Technology, Inc., Spansion Inc. (recently acquired by Cypress Semiconductor Corporation), STMicroelectronics NV and Winbond Electronics Corp. Among these large memory suppliers, we compete primarily as an overall value proposition and not on a product or technology basis. We expect competition in our current markets to increase in the future as existing competitors improve or expand their product offerings and as new companies enter these markets.

Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. Many of our competitors are substantially larger, have greater financial, technical, marketing, distribution, customer support and other resources, are more established than we are, and have significantly better brand recognition and broader product offerings which may enable them to better withstand adverse economic or market conditions in the future.

Our ability to compete successfully in the rapidly evolving memory market depends on several factors, including:

 

    performance of our products, as measured by speed;

 

    energy consumption of our products;

 

    the ease of implementation of our products by customers;

 

    the strength of customer relationships;

 

    reputation and reliability;

 

    customer support;

 

    our products’ cost effectiveness for the total solution relative to that of our competitors;

 

    our success in designing and manufacturing new products that anticipate the memory and integration needs of our customers’ current and future products and applications; and

 

    the design, manufacture, commercialization and market adoption of our CBRAM technology that anticipate the power, performance, reliability and integration needs of our customers’ next-generation and application-specific products and applications.

We believe we compete favorably with respect to each of these factors.

Intellectual Property and Licensing

Our success depends in part on our ability to protect our products and technologies from unauthorized third-party copying and use. To accomplish this, we rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, as well as customary contractual protections. As of June 30, 2015, we held 97 patents that expire at various times between June 2020 and December 2033 and had 48 U.S. patent applications pending. We also held 34 foreign patents that expire at various times between April 2021 and September 2029 and had 27 foreign patent applications pending.

We seek to file for patents that have broad application in the semiconductor industry and that would provide a competitive advantage. However, there can be no assurance that our pending patent application or any future applications will be approved, that any issued patents will provide us with competitive advantages or will not be challenged by third parties, or that the patents of others will not have an adverse effect on our ability to do business. In addition, there can be no assurance that others will not independently develop substantially equivalent intellectual property or otherwise gain access to our trade secrets or intellectual property, or disclose such intellectual property or trade secrets, or that we can effectively protect our intellectual property.

 

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In addition to intellectual property that we developed, we have acquired and licensed technology from third parties for incorporation in our products. In January 2007, we entered into a license agreement with Axon Technologies Corp. Pursuant to this license agreement, we have rights in Axon’s patents and trade secrets covering, among other things, Axon’s programmable metallization cell, or PMC, technology, which is a component of our CBRAM technology. This license provides us with broad rights to use and sub-license this technology, and we have the exclusive right to make, have made by authorized foundries or integrated device manufacturers, use, sell, lease, offer for sale, and import products covered by Axon’s licensed patents and trade secrets in certain fields of use. The license will last for the lifetime of the licensed patents, which currently ends in September 2026. We pay a royalty for use of the licensed intellectual property in our products. In July 2012, we purchased certain flash memory product assets from Atmel Corporation. As part of the asset purchase, Atmel granted us non-exclusive, perpetual and irrevocable licenses to its patent portfolio for development of flash memory products. As part of our intellectual property strategy we have invested significant resources to develop a broad patent portfolio around in-licensed technology, enabling us to provide application-specific solutions to our customers and providing us with, we believe, a significant advantage relative to our competitors.

Employees

As of June 30, 2015, we had 84 full-time employees. Of these full-time employees, 48 were engaged in research and development, 21 in sales and marketing, six in operations and support and nine in general and administrative capacities. Of our employees, 76 were based in the United States, four were based in the United Kingdom, two were based in France, one was based in Hong Kong and one was based in Taiwan. None of our employees are represented by a labor union. We have not experienced any work stoppages. We consider our relations with our employees to be good.

Facilities

We lease approximately 22,000 square feet in Sunnyvale, California for our corporate headquarters, pursuant to a noncancelable lease, which expires January 2016. We intend to add new facilities and expand our existing facilities as we add employees and grow our business, and we believe that suitable additional or substitute space will be available on commercially reasonable terms to meet our future needs.

Legal Proceedings

We are not currently a party to any legal proceedings which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, operating results, financial condition or cash flows. We may, from time to time, become involved in legal proceedings arising in the ordinary course of our business and as our business grows, we may become a party to an increasing number of legal proceedings.

 

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MANAGEMENT

Executive Officers and Directors

The following table provides information regarding our executive officers and directors and their ages as of September 30, 2015.

 

Name

   Age     

Position(s)

Narbeh Derhacobian

     52       President, Chief Executive Officer and Director

Ron Shelton

     54       Chief Financial Officer

Shane Hollmer

     48       Vice President, Engineering

Ishai Naveh

     57       Vice President, Marketing

Tom Spade

     49       Vice President, Worldwide Sales

Janet Wang

     47       Vice President, Discrete Products Group

Alexei Andreev(1)(3)

     43       Director

Nelson Chan(2)

     54       Lead Independent Director

Barry Cox

     73       Chairman of the Board Directors

Keith Crandell(2)(3)

     55       Director

Francis Lee(1)(3)

     63       Director

Kevin Palatnik(1)(2)

     57       Director

 

(1) Member of the audit committee.
(2) Member of the compensation committee.
(3) Member of the nominating and governance committee.

Narbeh Derhacobian co-founded our company in January 2006, and has served as our President and Chief Executive Officer and as a member of our board of directors since January 2006. During the twelve years prior to founding our company, he served in technical and managerial roles sequentially at Silicon Storage Technology, Inc., a flash memory company, Advanced Micro Devices, Inc., a semiconductor company, Virage Logic Corporation, a semiconductor company, and Cswitch Corporation, a semiconductor company. Mr. Derhacobian has a B.S. and M.S. degrees in physics and a Ph.D. in solid state physics from the University of California, Los Angeles and an M.B.A. from San Jose State University. We believe that Mr. Derhacobian is qualified to serve as a member of our board of directors because of the perspective and experience he brings as our President and Chief Executive Officer and his management and leadership experience.

Ron Shelton has served as our Chief Financial Officer since December 2011. Prior to joining our company, he served as Senior Vice President and Chief Financial Officer of GigOptix Inc., a fabless semiconductor company, from 2009 to January 2011. During the thirteen years prior to joining GigOptix, Inc., Mr. Shelton served as Chief Financial Officer sequentially at Cirrus Logic, Inc, a fabless semiconductor company, Lara Technology Inc., a network technologies company, Alliance Semiconductor Corporation, a semiconductor company, Alien Technology LLC, an RFID company, and IML, Inc., a semiconductor company. Mr. Shelton has a B.A. in economics from Stanford University.

Shane Hollmer co-founded our company in January 2006, and has served as our Vice President of Engineering since April 2007. During the fifteen years prior to founding our company, he served in engineering and engineering management roles at Advanced Micro Devices, Inc., a semiconductor company, Emosyn LLC, a fabless semiconductor company, and Monolithic Power Systems, Inc., a semiconductor company. Mr. Hollmer has a B.S. degree in electrical engineering from the University of California, Berkeley, and an M.B.A. from San Jose State University.

Ishai Naveh co-founded our company in January 2006, and has served as our Vice President of Marketing and Business Development since April 2007. Prior to founding our company, he served in various roles at Tower Semiconductor Ltd., a semiconductor company, from March 1993 to September 2007, including most recently as

 

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Vice President of Marketing for Non-volatile Memories and Mixed Signal Technologies from October 2002 to September 2007. Previously, he served in various roles at National Semiconductor Corporation, a semiconductor company, from September 1984 to March 1993. Mr. Naveh has a B.Sc. degree in physics from the Hebrew University and an M.B.A. from Heriott-Watt University.

Tom Spade has served as our Vice President Worldwide Sales since December 2014. Prior to joining our company, he served as Vice President of Worldwide Sales at Audience, Inc., a semiconductor company, from August 2010 to August 2014, and at Boston-Power, Inc., a battery systems company, from August 2009 to August 2010. Prior to that, he served as Vice President of Worldwide Sales at Validity, Inc., a sensor technology company, from June 2007 to August 2009. Mr. Spade served as Vice President of Worldwide Sales at Synaptics, a mobile interface solutions company, from March 1998 to June 2007. Prior to that, he served as the Director of Sales at Alliance Semiconductor from May 1993 until March 1998. Mr. Spade has a B.A. degree in economics and management from Albion College.

Janet Wang has served as our Vice President of the Discrete Products Group since August 2012. Prior to that, Ms. Wang served as our Vice President of CBRAM Technology Development from December 2009 to August 2012. From November 2007 to December 2009, she served as our Director of Technology Development. Prior to joining our company, Ms. Wang served in managerial and engineering roles sequentially at Broadcom Corporation, a network and communications company, from 2002 to 2007, Transmeta Corporation, a fabless semiconductor company, from 2000 to 2002, Advanced Micro Devices, Inc., a semiconductor company, from 1997 to 2000, and Aerospace Corporation, an aerospace research corporation, from 1995 to 1997. Ms. Wang has a B.Sc. degree, a M.Sc. degree and a Ph.D. degree in electrical engineering from the University of California, Los Angeles.

Alexei Andreev has been a director of our company since August 2010. He has served as Executive Vice President and Managing Director of Harris & Harris Group, Inc., a venture capital firm specializing in nanotechnology and microsystems, since March 2005. From August 2002 to March 2005, Mr. Andreev was an associate with Draper Fisher Jurvetson, a venture capital firm. Previously, he worked for TLcom Capital Partners, a London-based venture capital fund and Renaissance Capital Group / Sputnik Funds, a venture capital fund in Moscow, Russia from September 1997 to August 2000. Mr. Andreev earned a B.S. degree with honors in material sciences and condensed matter physics and a Ph.D. in theoretical physics from Moscow Steel & Alloys Institute and a M.B.A. from Stanford Graduate School of Business. Our board of directors believes that Mr. Andreev’s significant experience in business operations, finance and investments qualify him to serve on our board of directors.

Nelson Chan has been a director of our company since September 2010. Mr. Chan served as Chief Executive Officer of Magellan Corporation, a consumer electronics company, from December 2006 to August 2008. From 1992 through 2006, he held various senior management positions at SanDisk Corporation, a flash memory storage company, including as Executive Vice President and General Manager, Consumer Business. Mr. Chan has been a director of Affymetrix, Inc., a genetic analysis company, since March 2010, Deckers Outdoor Corporation, a footwear, apparel and accessories design, marketing and distribution company, since December 2014, Outerwall Inc., a retail kiosk company, since July 2011 and the Chairman of the Board since June 2013, and Synaptics, since February 2007. Mr. Chan was a member of the board of directors of Silicon Laboratories, a semiconductor company. Mr. Chan is also a member of the board of several privately-held companies. Mr. Chan holds a B.S. degree in electrical and computer engineering from the University of California at Santa Barbara and a M.B.A. from Santa Clara University. Our board of directors believes that Mr. Chan’s substantial experience with public and private companies, both as an executive and board member, and his expertise in building profitable technology companies qualify him to serve on our board of directors.

Barry Cox has been a director of our company since July 2014 and the Chairman of our board of directors since October 2014. Mr. Cox served as the Chairman of the Board of Audience, Inc., a provider of voice and audio solutions, from October 2009 to September 2011 and as a member of its board of directors until July 2015 when it was acquired by Knowles Corporation. Since March 2012, he has served as director of Pixelworks, Inc.,

 

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a semiconductor company. Mr. Cox served as the Executive Chairman of the board of Touchstone Semiconductor Inc., a manufacturer of integrated circuits, from November 2012 until March 2014, when it was acquired by Silicon Laboratories Inc. Mr. Cox was a director of Summit Microelectronics, a semiconductor company, from April 1999 until May 2012, when Summit was acquired by Qualcomm Incorporated. Mr. Cox was a director of Grandis, Inc., a magnetic memory licensing company, from March 2009 until April 2011, when Grandis was acquired by Samsung Electronics Co., Ltd. Mr. Cox has over 45 years of experience in executive leadership positions in the semiconductor industry, including Chief Operating Officer, Chief Executive Officer and Chairman of the Board, in publicly and privately held companies. Mr. Cox holds a B.S. degree in general engineering from the United States Air Force Academy and an M.B.A. from Boston University. Our board of directors believes that Mr. Cox’s leadership roles in the global semiconductor industry and his experiences gained from serving as director of the boards of other public semiconductor companies qualify him to serve on our board of directors.

Keith Crandell has been a director of our company since February 2007. Since July 1994, Mr. Crandell has served as a managing director of ARCH Venture Partners, a venture capital firm focused on early-stage technology companies. He is a director of several private companies and he also serves as a director of the Illinois Venture Capital Association. Mr. Crandell holds a B.S. degree in chemistry and mathematics from St. Lawrence University, an M.S degree in chemistry from the University of Texas at Arlington and an M.B.A. from the University of Chicago. Our board of directors believes that Mr. Crandell’s extensive knowledge of the semiconductor industry and his financial and investment expertise qualify him to serve on our board of directors.

Francis Lee has been a director of our company since July 2015. Mr. Lee has served as the Chairman of the Board of Directors of Synaptics Incorporated, a semiconductor company, since October 2008 and a director of that company since December 1998. Mr. Lee served as Chief Executive Officer of Synaptics from December 1998 until July 2009 and as President of Synaptics from December 1998 to July 2008. Mr. Lee was a consultant from August 1998 to November 1998. From May 1995 until July 1998, he served as General Manager of NSM, a Hong Kong-based joint venture between National Semiconductor Corporation and S. Megga. Mr. Lee held a variety of executive positions for National Semiconductor from 1988 until August 1995. These positions included Vice President of Communication and Computing Group, Vice President of Quality and Reliability, Director of Standard Logic Business Unit, and various other operations and engineering management positions. Mr. Lee holds a B.S. degree in electrical engineering from the University of California, Davis. Our board of directors believes that Mr. Lee’s extensive knowledge of the semiconductor industry and his extensive business experience qualify him to serve on our board of directors.

Kevin Palatnik has been a director of our company since August 2015. Mr. Palatnik served as the Chief Financial Officer of Audience, Inc., a provider of voice and audio solutions, from August 2011 until July 2015 when it was acquired by Knowles Corporation. From 1994 to 1999 and June 2001 to November 2010, he held various positions at Cadence Design Systems, Inc., an electronic design automation software company, including Corporate Controller and most recently Senior Vice President and Chief Financial Officer. Mr. Palatnik also spent 14 years at IBM where he held various engineering and executive financial positions. Mr. Palatnik holds a B.S. degree in industrial engineering and operations research, as well as an M.B.A. from Syracuse University. Our board of directors believes that Mr. Palatnik’s extensive business and financial experience over the past two decades qualify him to serve on our board of directors.

Our executive officers are elected by, and serve at the discretion of, our board of directors. There are no familial relationships among our directors and officers.

 

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Board of Directors Composition

Current Board of Directors

Under our bylaws, our board of directors may set the authorized number of directors. Our board of directors has set the authorized number of directors as seven. Our board of directors currently consists of seven members.

Pursuant to our Fifth Amended and Restated Voting Agreement dated as of August 19, 2013, Messrs. Andreev, Chan, Crandell and Derhacobian and four former directors were designated to serve as members of our board of directors. Pursuant to that agreement, Mr. Derhacobian was selected the “CEO Director” (as defined in the voting agreement) voted on by the holders of our common stock. Messrs. Crandell and Andreev and three former directors were selected as the representatives of our preferred stock. Mr. Chan and a former director were selected as the two “Outside Directors” (as defined in the voting agreement), elected by the holders of our common stock and preferred stock voting together as a single class. On July 15, 2014, our board of directors appointed Barry Cox for the position of an outside director, replacing the former director. Current members of our board of directors will continue to serve as directors until their resignations or until their successors are duly elected by the holders of our common stock, despite the fact that the voting agreement will terminate upon the closing of this offering.

Classified Board of Directors Following This Offering

Our restated certificate of incorporation and bylaws that will be in effect upon the closing of this offering provide for a classified board of directors consisting of three classes of directors, each serving staggered three-year terms. Our directors will be divided among the three classes as follows:

 

    Class I directors will be Messrs. Andreev and Crandell, whose initial term will expire at the annual meeting of stockholders to be held in 2016;

 

    Class II directors will be Messrs. Lee and Palatnik, whose initial term will expire at the annual meeting of stockholders to be held in 2017; and

 

    Class III directors will be Messrs. Chan, Cox and Derhacobian, whose initial term will expire at the annual meeting of stockholders to be held in 2018.

Directors in a particular class will be elected for three-year terms at the annual meeting of stockholders in the year in which their term expires. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Each director’s term continues until the election and qualification of his successor, or his earlier death, resignation or removal for cause.

Our restated certificate of incorporation and amended and restated bylaws that will be in effect following the closing of this offering provide that only our board of directors may fill vacancies on our board of directors until the next annual meeting of stockholders. Any additional directorships resulting from an increase in the authorized number of directors would be distributed among the three classes so that, as nearly as possible, each class would consist of one-third of the authorized number of directors.

The classification of our board of directors and provisions described above may have the effect of delaying or preventing changes in our control or management. See “Description of Capital Stock—Anti-Takeover Provisions—Restated Certificate of Incorporation and Restated Bylaw Provisions.”

Director Independence

We have applied to list our common stock on the NASDAQ Global Market. The listing rules of the NASDAQ Stock Market require that a majority of the members of our board of directors be independent within

 

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one year of the closing of this offering. Based upon information requested from and provided by each director concerning his background, employment and affiliations, our board of directors has determined that none of our non-employee directors has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of the NASDAQ Stock Market. In making this determination, our board of directors considered the relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. The independence of our board committee members is discussed below.

Committees of Our Board of Directors

Our board of directors has established an audit committee, a compensation committee and a nominating and governance committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignations or until otherwise determined by our board of directors. Our board of directors has adopted a charter for each of these committees that complies with the applicable requirements of current NASDAQ Stock Market and Securities Exchange Commission, or the SEC, rules and regulations. Following the closing of this offering, copies of the charters for each committee will be available without charge, upon request in writing to Adesto Technologies Corporation, 1250 Borregas Avenue, Sunnyvale, California 94089, Attn: Investor Relations, or on the investor relations portion of our website.

Audit Committee

Our audit committee is comprised of Mr. Palatnik, who is the chair of the audit committee, and Messrs. Andreev and Lee. The composition of our audit committee meets the requirements for independence under current NASDAQ Stock Market and SEC rules and regulations. Each member of our audit committee is financially literate as required by current NASDAQ Stock Market listing standards. In addition, our board of directors has determined that Mr. Palatnik is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act. Our audit committee, among other things:

 

    selects a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

 

    helps to ensure the independence and performance of the independent registered public accounting firm;

 

    discusses the scope and results of the audit with the independent registered public accounting firm, and reviews, with management and the independent accountants, our interim and year-end financial statements;

 

    develops procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

 

    reviews our policies on risk assessment and risk management;

 

    obtains and reviews a report by the independent registered public accounting firm at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues;

 

    approves (or, as permitted, pre-approves) all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm; and

 

    reviews related party transactions and proposed waivers of our code of conduct.

 

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Compensation Committee

Our compensation committee is comprised of Mr. Chan, who is the chair of the compensation committee, and Messrs. Crandell and Palatnik. The composition of our compensation committee meets the requirements for independence under current NASDAQ Stock Market and SEC rules and regulations. Each member of this committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Code. The purpose of our compensation committee is to discharge the responsibilities of our board of directors relating to compensation of our executive officers. Our compensation committee will, among other things:

 

    review, approve and determine, or make recommendations to our board of directors regarding, the compensation of our executive officers;

 

    administer our stock and equity incentive plans;

 

    review and approve and make recommendations to our board of directors regarding incentive compensation and equity plans; and

 

    establish and review general policies relating to compensation and benefits of our employees.

Nominating and Governance Committee

The nominating and governance committee is comprised of Mr. Lee, who is the chair of the nominating and governance committee, and Messrs. Andreev and Crandell. The composition of our nominating and governance committee meets the requirements for independence under current NASDAQ Stock Market and SEC rules and regulations. Our nominating and governance committee, among other things:

 

    identifies, evaluates and selects, or makes recommendations to our board of directors regarding, nominees for election to our board of directors and its committees;

 

    evaluates the performance of our board of directors and of individual directors;

 

    considers and makes recommendations to our board of directors regarding the composition of our board of directors and its committees;

 

    reviews developments in corporate governance practices;

 

    evaluates the adequacy of our corporate governance practices and reporting; and

 

    develops and makes recommendations to our board of directors regarding corporate governance guidelines and matters.

Compensation Committee Interlocks and Insider Participation

During 2014, all compensation decisions were made by our board of directors; provided that in certain instances the compensation committee provided recommendations to the board. Our chief executive officer, Mr. Derhacobian, and Chairman, Mr. Cox, participated in deliberations of our board of directors concerning executive officer compensation during 2014. No interlocking relationship exists between our board of directors and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

Director Compensation

Other than as set forth in the table and described more fully below we did not pay any fees to, reimburse any expense of (other than reimbursement of reasonable travel and related expenses incurred by non-employee directors in connection with their attendance at meetings of our board of directors and its committees), make any

 

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equity awards or non-equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2014. All compensation that we paid to Mr. Derhacobian, one of our two employee directors, is set forth in the tables below under “Executive Compensation—Executive Compensation Tables.” No compensation was paid to Mr. Derhacobian in his capacity as a director.

 

Director Name

   Fees Earned
or Paid in
Cash ($)
     Option Awards
($) (1)(2)
    Total ($)  

Alexei Andreev

   $ —         $ —        $ —     

Matthew Boyle*

     —           —          —     

Nelson Chan

     30,000         2,148 (4)       32,148   

Barry Cox (3)

     —           9,291        9,291   

Keith Crandell

     —           —          —     

Steve Drehobl*

     —           —          —     

Peter Thomas*

     —           —          —     

 

* Former director.
(1) The amounts reported in the Option Awards column represent the grant date fair value of the stock options granted to the non-employee directors during 2014, computed in accordance with Accounting Standards Codification Topic 718, Compensation—Stock Compensation , or ASC 718, and as discussed in note 10 of our notes to consolidated financial statements. The amounts reported in the Option Awards column reflect the accounting cost for these stock-based awards, and do not correspond to the actual economic value that may be received by the non-employee directors from the awards.
(2) As of December 31, 2014, Messrs. Chan and Cox were our only non-employee directors with outstanding options of which they held 17,160 and 24,241 respectively.
(3) Mr. Cox is an executive officer of Adesto (other than a named executive officer). Mr. Cox’s compensation for services provided other than as a director in 2014 is excluded from this table.
(4) Represents the incremental fair value of stock options computed in accordance with ASC 718 in connection with a stock option exercise price adjustment effective as of August 2014, as described below under the section titled “Stock Option Repricing.”

In September 2015, our board of directors approved a compensation policy for non-employee directors that will be effective following the closing of this offering. Pursuant to the director compensation policy, each non-employee director is entitled to receive the following cash compensation, paid quarterly, in equal installments, an annual cash retainer of $35,000 for serving on the board of directors and additional fees for services as follows:

 

    $25,000 for the chairman of the board of directors;

 

    $19,000 for the chair of the audit committee and $8,000 for each of its other members;

 

    $10,000 for the chair of the compensation committee and $5,000 for each of its other members; and

 

    $6,000 for the chair of the nominating and governance committee and $3,000 for each of its other members.

Pursuant to a policy adopted by our board of directors, each non-employee director who first becomes a member of our board of directors after the completion of this offering will be granted a stock option having a fair market value on the grant date equal to $50,000 and, immediately following each annual meeting of our stockholders, each non-employee director will automatically be granted an additional restricted stock unit having a fair market value on the grant date equal to $30,000 if the non-employee director has served continuously as a member of our board of directors for at least one year. Each stock option will have a ten-year term and will vest monthly over four years. Each restricted stock unit grant will fully vest on the one-year anniversary of the grant date. Vesting of the stock options and restricted stock units is subject to the director’s continuous service on the board of directors.

In September 2015, we granted Francis Lee an option to purchase 3,030 shares of our common stock at an exercise price of $10.00 per share. In addition, we granted Kevin Palatnik an option to purchase 3,030 shares of our common stock at an exercise price of $10.00 per share. These stock options have a ten-year term and will vest monthly over one year.

 

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In addition, to address the dilution of our employees’ and certain non-employee directors’ equity interests in our company as a result of the conversion of the Series E convertible preferred stock in connection with this offering, upon the closing of this offering, we intend to grant our employees and certain non-employee directors restricted stock units equal to the number of outstanding shares of common stock and options held by them on the grant date. Accordingly, our board of directors has authorized the grant, effective upon the closing of this offering, to Mr. Chan, Mr. Cox, Mr. Lee and Mr. Palatnik of 20,165, 25,938, 2,470 and 2,470 restricted stock units, respectively. Each of these restricted stock units will vest over two years, with one-half of the underlying shares vesting one-year after the grant date and one-eighth of the underlying shares vesting at the end of each three-month period thereafter.

 

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EXECUTIVE COMPENSATION

Executive Compensation Tables

The following table provides information regarding all plan and non-plan compensation awarded to, earned by or paid to our chief executive officer and our two other most highly compensated executive officers as of December 31, 2014.

Summary Compensation Table

 

Name and Principal Position

   Year      Salary ($)      Option
Awards ($) (1)
    Non-Equity
Incentive Plan
Compensation ($)
     All Other
Compensation ($)
     Total ($) (2)  

Narbeh Derhacobian

     2014       $ 297,375       $ 19,466 (3)     $ 1,766         —         $ 318,607   

President and Chief Executive Officer

                

Ron Shelton

     2014         272,594         82,002 (4)       —           —           354,596   

Chief Financial Officer

                

Shane Hollmer

     2014         245,830         48,995 (3)       3,566         —           298,391   

Vice President, Engineering

                

 

(1) The amounts reported in this column represent the grant date fair value of the stock options granted during 2014, computed in accordance with ASC 718, and as discussed in note 10 of our notes to consolidated financial statements. The amounts reported in this column reflect the accounting cost for these stock-based awards, and do not correspond to the actual economic value that may be received by the executive officers from the awards.
(2) The amounts in this column represent the sum of the compensation amounts reflected in the other columns of this table.
(3) Includes the incremental fair value of stock options computed in accordance with ASC 718 in connection with a stock option exercise price adjustment effective as of August 2014, as described below under the section titled “Stock Option Repricing.”
(4) Represents the incremental fair value of stock options computed in accordance with ASC 718 in connection with a stock option exercise price adjustment effective as of August 2014, as described below under the section titled “Stock Option Repricing.”

In April 2015, we granted Mr. Derhacobian a stock option to purchase 4,545 shares of common stock, Mr. Shelton a stock option to purchase 13,636 shares of common stock and Mr. Hollmer a stock option to purchase 15,151 shares of common stock, each at an exercise price of $3.30 per share. Each of these stock options vests as to 1/24 of the underlying shares each month over two years. In April 2015, we also granted Mr. Derhacobian a stock option to purchase 50 shares of common stock and Mr. Hollmer a stock option to purchase 25 shares of common stock, each at an exercise price of $3.30 per share. Each of these stock options is fully vested. In addition, in September 2015, we granted Mr. Derhacobian a stock option to purchase 30 shares of common stock and Mr. Hollmer a stock option to purchase 60 shares of common stock, each at an exercise price of $10.00 per share.

In August 2015, we approved increases to the base salary levels for Mr. Derhacobian, Mr. Shelton and Mr. Hollmer to $360,000, $300,000 and $275,000 per year, respectively, and to their cash bonus percentages to 35%, 35% and 25% of their annual base salaries, respectively, with all such increases to take effect upon the closing of this offering.

In addition, to address the dilution of our employees’ and certain non-employee directors’ equity interests in our company as a result of the conversion of the Series E convertible preferred stock in connection with this offering, upon the closing of this offering, we intend to grant to our employees and certain non-employee directors restricted stock units equal to the number of outstanding shares of common stock and options held by them on the grant date. Accordingly, our board of directors has authorized the grant, effective upon the closing of this offering, to Mr. Derhacobian, Mr. Shelton and Mr. Hollmer of 249,154, 85,992 and 80,866 restricted stock units, respectively. Each of these restricted stock units will vest over two years, with one-half of the underlying shares vesting one-year after the grant date and one-eighth of the underlying shares vesting at the end of each three-month period thereafter. In addition, in the event of a change in control, all unvested shares subject to each award will vest in full.

 

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Outstanding Equity Awards at December 31, 2014

 

    Option Awards  

Name

  Grant Date     Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price ($) (1)
     Option
Expiration
Date
 

Narbeh Derhacobian

    2/15/2007 (2)(3)       63,696         —   (4)     $ 0.99         2/14/2017   
    5/11/2010 (2)(3)       4,545         —   (5)       1.65         5/10/2020   
    12/14/2010 (2)(3)       121         —   (5)       1.65         12/13/2020   
    12/13/2011 (2)(3)       45         —   (6)       1.65         12/12/2021   
    6/18/2013 (2)(3)       11,830         8,351 (5)       1.65         6/17/2023   
    8/11/2014 (2)(3)       40         —   (6)       1.65         8/10/2024   
    10/14/2014 (2)(3)       50         —   (6)       1.65         10/13/2024   

Ron Shelton

    2/7/2012 (2)(3)       1,393         —   (5)       1.65         2/6/2022   
    6/18/2013 (2)(3)       60,288         30,166 (5)       1.65         6/17/2023   

Shane Hollmer

    10/23/2007 (3)       32,575         —   (4)       1.65         10/22/2017   
    6/19/2008 (3)       5,321         —   (4)       1.65         6/18/2018   
    5/11/2010 (3)       13,636         —   (5)       1.65         5/10/2020   
    12/14/2010 (3)       121         —   (5)       1.65         12/13/2020   
    12/13/2011 (3)        128         —   (6)       1.65         12/12/2021   
    4/10/2012 (3)       15         —   (6)       1.65         4/9/2022   
    6/18/2013 (3)       12,666         9,239 (5)       1.65         6/17/2023   
    8/11/2014 (3)       70         —   (6)       1.65         8/10/2024   
    10/14/2014 (3)       83         —   (6)       1.65         10/13/2024   

 

(1) Represents the fair market value of a share of our common stock, as determined by our board of directors.
(2) Option is subject to 50% accelerated vesting following a change of control. See “—Employment Arrangements” below.
(3) Option is subject to 100% accelerated vesting upon a qualifying termination of the executive’s employment with us following a change of control. See “—Employment Arrangements” below.
(4) The option vests over a four-year period as follows: 25% of the shares of our common stock underlying the options vest on the first anniversary of the individual’s vesting commencement date and, thereafter, the remaining shares of our common stock underlying the options vest in 36 equal monthly installments over the next three years. The vesting commencement dates for Mr. Derhacobian’s and Mr. Hollmer’s options are February 21, 2007 and April 16, 2007, respectively.
(5) The option vested or vests over a four-year period as follows: 1/48th of the shares of common stock underlying the option vest each month following the grant date.
(6) Fully vested as of the grant date.

Employment Arrangements

Narbeh Derhacobian

On February 21, 2007, we entered into an employment agreement with Mr. Derhacobian in connection with his appointment as our President and Chief Executive Officer, which we subsequently amended and restated on August 16, 2013. The terms and conditions of his amended employment agreement provided for an annual base salary of $300,000, subject to review by the board of directors at the start of each fiscal year, and eligibility for an annual bonus, health insurance and other employee benefits as we establish for our employees from time to time. Pursuant to his amended and restated employment agreement, Mr. Derhacobian is an at-will employee of the company. In the event a “Change in Control” (as such term is defined in his amended and restated employment agreement), Mr. Derhacobian is eligible to receive accelerated vesting with respect to 50% of the total number of unvested shares subject to all of his other outstanding stock options. In the event a “Change in Control” (as such term is defined in his employment agreement) and Mr. Derhacobian’s termination other than for “Cause” (as such term is defined in his employment agreement) or self-termination for “Good Reason” (as

 

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such term is defined in his employment agreement), in either case upon or within 12 months following the Change in Control, Mr. Derhacobian is eligible to receive accelerated vesting with respect to 100% of the total number of unvested shares subject to all of his other outstanding stock options. In addition, in the event of such a qualifying termination, he would also receive a lump sum payment equal to the sum of twelve months of his then-current annual base salary, 100% of the target annual bonus and reimbursement of COBRA premiums for up to twelve months.

Ron Shelton

On May 30, 2013, we entered into an employment offer letter with Mr. Shelton in connection with his appointment as our Chief Financial Officer. The terms and conditions of his employment offer letter provided for an annual base salary of $275,000, subject to review by the board of directors at the start of each fiscal year, and eligibility for an annual equity and cash bonuses, health insurance and other employee benefits as we establish for our employees from time to time. Pursuant to his employment offer letter, Mr. Shelton is an at-will employee of the company. In the event a “Change in Control” (as such term is defined in his employment offer letter), Mr. Shelton is eligible to receive accelerated vesting with respect to 50% of the total number of unvested shares subject to all of his other outstanding stock options. In the event a “Change in Control” (as such term is defined in his employment offer letter) and Mr. Shelton’s termination other than for “Cause” (as such term is defined in his employment offer letter) or self-termination for “Good Reason” (as such term is defined in his employment offer letter), in either case upon or within 12 months following the Change in Control, Mr. Shelton is eligible to receive accelerated vesting with respect to 100% of the total number of unvested shares subject to all of his other outstanding stock options. In addition, in the event of such a qualifying termination, he would also receive a lump sum payment equal to the sum of twelve months of his then-current annual base salary, 100% of the target annual bonus and reimbursement of COBRA premiums for up to twelve months.

Shane Hollmer

On April 1, 2007, we entered into an offer of employment with Mr. Hollmer in connection with his appointment as our Vice President of Engineering, which we subsequently amended and restated on August 16, 2013. The terms and conditions of his amended employment agreement provided for an annual base salary of $248,000, subject to review by the board of directors at the start of each fiscal year, and eligibility for an annual bonus, health insurance and other employee benefits as we establish for our employees from time to time. In the event a “Change in Control” (as such term is defined in his employment agreement) and Mr. Hollmer’s termination other than for “Cause” (as such term is defined in his employment agreement) or self-termination for “Good Reason” (as such term is defined in his employment agreement), in either case upon or within 12 months following the Change in Control, Mr. Hollmer is eligible to receive accelerated vesting with respect to 100% of the total number of unvested shares subject to all of his other outstanding stock options. In addition, in the event of such a qualifying termination, he would also receive a lump sum payment equal to the sum of six months of his then-current annual base salary, 100% of the target annual bonus and reimbursement of COBRA premiums for up to six months.

Stock Option Repricing

In August 2014, we amended certain of our outstanding stock options to reset their respective exercise prices to $1.65 per share, the fair market value of our common stock as of August 11, 2014, as determined by our board of directors. Options repriced included all then-outstanding stock options with an exercise price higher than $1.65 per share that remained unexercised on August 11, 2014. Pursuant to this repricing, options to purchase 387,749 shares of common stock held by our then current employees were repriced, including options to purchase 152,544 shares of common stock held by our named executive officers.

 

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Employee Benefit Plans

2007 Equity Incentive Plan

Our board of directors adopted our 2007 Equity Incentive Plan, or 2007 Plan, in February 2007. The 2007 Plan was subsequently approved by our stockholders in February 2007. The 2007 Plan, as amended from time to time, provides for the grant of both incentive stock options, which qualify for favorable tax treatment to their recipients under Section 422 of the Code, and nonstatutory stock options, as well as for the issuance of shares of restricted stock. We may grant incentive stock options only to our employees. We may grant nonstatutory stock options to our employees, directors and consultants. The exercise price of each incentive stock option must be at least equal to the fair market value of our common stock on the date of grant. The exercise price of incentive stock options granted to 10% stockholders must be at least equal to 110% of the fair market value of our common stock on the date of grant. The maximum permitted term of options granted under our 2007 Plan is ten years (or five years in the event of incentive stock options granted to 10% stockholders). In the event we are a party to a merger, consolidation, or sale of substantially all of our assets, the 2007 Plan provides that the acquiring corporation or successor to us may assume, convert, substitute or replace awards under the 2007 Plan. In the event such successor or acquiring corporation refuses to assume, convert, substitute or replace awards, then such awards will expire on such transaction at such time and on such conditions as our board of directors will determine.

As of June 30, 2015, we had 2,651,505 shares of our common stock reserved for issuance under our 2007 Plan, after giving effect to the reservation of an additional 1,863,636 shares of our common stock in April 2015. As of June 30, 2015, options to purchase 39,407 of these shares had been exercised, options to purchase 744,855 of these shares remained outstanding and 1,867,243 of these shares remained available for future grant. The options outstanding as of June 30, 2015, had a weighted-average exercise price of $1.9164 per share. Our 2015 Equity Incentive Plan will be effective upon the date immediately prior to the date of this prospectus. As a result, we will not grant any additional awards under the 2007 Plan following that date. Any outstanding awards granted under the 2007 Plan will remain outstanding, subject to the terms of our 2007 Plan and agreements thereunder, until such outstanding options are exercised or shares become vested or until such awards terminate or expire by their terms. Options granted under the 2007 Plan have terms similar to those described below with respect to options granted under our 2015 Equity Incentive Plan.

2015 Equity Incentive Plan

In September 2015, our board of directors adopted, and in October 2015 our stockholders approved, our 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan will become effective on the date immediately prior to the date of this prospectus and will serve as the successor to our 2007 Plan. Any remaining shares available for issuance under our 2007 Plan will become shares reserved for issuance under our 2015 Equity Incentive Plan, and we will cease granting awards under our 2007 Plan. The number of shares reserved for issuance under our 2015 Equity Incentive Plan will increase automatically on the 1st day of January of each of 2016 through 2025 by the number of shares equal to 4% of the total outstanding shares of our common stock as of the immediately preceding December 31. However, our board of directors may reduce the amount of the increase in any particular year. In addition, the following shares will be available for grant and issuance under our 2015 Equity Incentive Plan:

 

    shares subject to awards granted under our 2015 Equity Incentive Plan that cease to be subject to the awards for any reason other than exercises of stock options or stock appreciation rights;

 

    shares subject to awards granted under our 2015 Equity Incentive Plan that are subsequently forfeited or repurchased by us at the original issue price;

 

    shares subject to awards granted under our 2015 Equity Incentive Plan that otherwise terminate without shares being issued;

 

    shares surrendered, cancelled, or exchanged for cash or a different award (or combination thereof);

 

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    shares issuable upon the exercise of options or subject to other awards under our 2007 Plan prior to the date of this prospectus that cease to be subject to such options or other awards by forfeiture or otherwise after the date of this prospectus;

 

    shares issued under our 2007 Plan that are repurchased by us or forfeited after the date of this prospectus; and

 

    shares subject to awards under our 2007 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.

Our 2015 Equity Incentive Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, restricted stock units, performance awards and stock bonuses. No person will be eligible to receive more than 2,000,000 shares in any calendar year under our 2015 Equity Incentive Plan other than a new employee of ours, who will be eligible to receive no more than 4,000,000 shares under the plan in the calendar year in which the employee commences employment. The aggregate number of shares of our common stock that may be subject to awards granted to any one non-employee director pursuant to the 2015 Equity Incentive Plan in any calendar year shall not exceed 300,000. Our 2015 Equity Incentive Plan provides that no more than 25,000,000 shares will be issued as incentive stock options.

Our 2015 Equity Incentive Plan will be administered by our compensation committee, all of the members of which are outside directors as defined under applicable federal tax laws, or by our board of directors acting in place of our compensation committee. The compensation committee will have the authority to construe and interpret our 2015 Equity Incentive Plan, grant awards and make all other determinations necessary or advisable for the administration of the plan.

Our 2015 Equity Incentive Plan provides for the grant of awards to our employees, directors, consultants, independent contractors and advisors, provided the consultants, independent contractors, directors and advisors render services not in connection with the offer and sale of securities in a capital-raising transaction. The exercise price of stock options must be at least equal to the fair market value of our common stock on the date of grant.

We anticipate that in general, options will vest over a four-year period. Options may vest based on time or achievement of performance conditions. Our compensation committee may provide for options to be exercised only as they vest or to be immediately exercisable with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. The maximum term of options granted under our 2015 Equity Incentive Plan is ten years.

A restricted stock award is an offer by us to sell shares of our common stock subject to restrictions, which may vest based on time or achievement of performance conditions. The price, if any, of a restricted stock award will be determined by the compensation committee. Unless otherwise determined by the compensation committee at the time of award, vesting will cease on the date the holder no longer provides services to us and unvested shares will be forfeited to or repurchased by us. Stock appreciation rights provide for a payment, or payments, in cash or shares of our common stock, to the holder based upon the difference between the fair market value of our common stock on the date of exercise and the stated exercise price at grant up to a maximum amount of cash or number of shares. Stock appreciation rights may vest based on time or achievement of performance conditions.

Restricted stock units represent the right to receive shares of our common stock at a specified date in the future, subject to forfeiture of that right because of termination of employment or failure to achieve certain performance conditions. If a restricted stock unit has not been forfeited, then on the date specified in the restricted stock unit agreement, we will deliver to the holder of the restricted stock unit whole shares of our common stock (which may be subject to additional restrictions), cash or a combination of our common stock and cash.

 

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Performance awards cover a number of shares of our common stock that may be settled upon achievement of the pre-established performance conditions in cash or by issuance of the underlying shares. These awards are subject to forfeiture prior to settlement due to termination of employment or failure to achieve the performance conditions.

Stock bonuses may be granted as additional compensation for service or performance. Stock bonuses can be subject to restrictions such as performance criteria or service criteria.

In the event there is a specified type of change in our capital structure without our receipt of consideration, such as a stock split, appropriate adjustments will be made to: the number of shares reserved under our 2015 Equity Incentive Plan, the exercise prices of and number of shares subject to outstanding stock options and stock appreciation rights, the number of shares subject to all other outstanding awards, the maximum number of shares that may be issued as incentive stock options, the maximum number of shares that may be issued to an individual or to a new employee in any one calendar year and the number of shares that may be granted as awards to our non-employee members of our board of directors.

Awards granted under our 2015 Equity Incentive Plan may not be transferred in any manner other than by will or by the laws of descent and distribution or as determined by our compensation committee. Unless otherwise permitted by our compensation committee, stock options may be exercised during the lifetime of the optionee only by the optionee or the optionee’s guardian or legal representative. Options granted under our 2015 Equity Incentive Plan generally may be exercised for a period of three months after the termination of the optionee’s service to us, for a period of 12 months in the case of death or disability, or such longer period as our compensation committee may provide. Stock options generally terminate immediately upon termination of employment for cause.

Our 2015 Equity Incentive Plan provides that, in the event of a sale, lease or other disposition of all or substantially all of our assets or specified types of mergers or consolidations or a corporate transaction, outstanding awards under our 2015 Equity Incentive Plan may be continued, assumed, substituted, have their vesting accelerated (in full or partially); settled for their full value in cash, cash equivalents or securities of the successor entity (and such settled awards may continue to have vesting attached to them so long as such vesting schedule is no less favorable than the schedule attached to the original award); or cancelled in exchange for no consideration. Awards need not be treated similarly in such a corporate transaction. In the event of a corporate transaction, the vesting of all awards granted to our non-employee directors shall accelerate and such awards shall become exercisable (as applicable) in full upon consummation of the corporate transaction.

Our 2015 Equity Incentive Plan will terminate ten years from the date our board of directors approves the plan, unless it is terminated earlier by our board of directors. Our board of directors may amend or terminate our 2015 Equity Incentive Plan at any time. If our board of directors amends our 2015 Equity Incentive Plan, it does not need to ask for stockholder approval of the amendment unless required by applicable law.

2015 Employee Stock Purchase Plan

In September 2015, our board of directors adopted, and in October 2015 our stockholders approved, our 2015 Employee Stock Purchase Plan. The 2015 Employee Stock Purchase Plan will become effective on the date of this prospectus. We adopted our 2015 Employee Stock Purchase Plan in order to enable eligible employees to purchase shares of our common stock at a discount following the date of this offering. Purchases will be accomplished through participation in discrete offering periods. Our 2015 Employee Stock Purchase Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Code. We reserved 150,000 shares of our common stock for issuance under our 2015 Employee Stock Purchase Plan. The number of shares reserved for issuance under our 2015 Employee Stock Purchase Plan will increase automatically on the 1st day of January following the first offering date by the number of shares equal to 1% of the total outstanding shares of our common stock as of the immediately preceding December 31 (rounded to the nearest whole share). However, our board of directors may

 

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reduce the amount of the increase in any particular year. The aggregate number of shares issued over the term of our 2015 Employee Stock Purchase Plan will not exceed 2,250,000 shares of our common stock.

Our compensation committee will administer our 2015 Employee Stock Purchase Plan. Our employees generally are eligible to participate in our 2015 Employee Stock Purchase Plan if they are employed by us for at least 20 hours per week and more than five months in a calendar year. Employees who are 5% stockholders, or would become 5% stockholders as a result of their participation in our 2015 Employee Stock Purchase Plan, are ineligible to participate in our 2015 Employee Stock Purchase Plan. We may impose additional restrictions on eligibility. Under our 2015 Employee Stock Purchase Plan, eligible employees will be able to acquire shares of our common stock by accumulating funds through payroll deductions. Eligible employees will be able to select a rate of payroll deduction between 1% and 15% of their base cash compensation. We also have the right to amend or terminate our 2015 Employee Stock Purchase Plan at any time. Our 2015 Employee Stock Purchase Plan will continue until the earlier to occur of its termination by our board of directors, the issuance of all shares reserved for issuance under it or the tenth anniversary of its effective date.

When an initial offering period commences, our employees who meet the eligibility requirements for participation in that offering period will automatically be granted a nontransferable option to purchase shares in that offering period. For subsequent offering periods, new participants will be required to enroll in a timely manner. Once an employee is enrolled, participation will be automatic in subsequent offering periods. An employee’s participation automatically ends upon termination of employment for any reason.

Except for the first offering period, each offering period will run for no more than six months, with purchases occurring every six months. The first offering period will begin upon the date of this prospectus and will end approximately six months later.

No participant will have the right to purchase shares of our common stock in an amount, when aggregated with purchase rights under all our employee stock purchase plans that are also in effect in the same calendar year, that have a fair market value of more than $25,000, determined as of the first day of the applicable purchase period, for each calendar year in which that right is outstanding. In addition, no participant will be permitted to purchase more than 2,500 shares during any one purchase period or a lesser amount determined by our compensation committee. The purchase price for shares of our common stock purchased under our 2015 Employee Stock Purchase Plan will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period.

In the event of a corporate transaction any then outstanding offering period that commenced prior to the closing of the proposed corporate transaction will be shortened and terminated on a new purchase date. The new purchase date will occur on or prior to the closing of the proposed corporate transaction, and our 2015 Employee Stock Purchase Plan will terminate upon the consummation of the proposed corporate transaction.

401(k) Plan

We maintain a retirement plan for the benefit of our employees. The plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Code, so that contributions to the 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan (except in the case of contributions under the 401(k) plan designated as Roth contributions). The 401(k) plan provides that each participant may contribute up to 100% of his or her pre-tax compensation, up to a statutory limit, which is $18,000 for 2015. Participants who are at least 50 years old can also make “catch-up” contributions of up to an additional $6,000 above the statutory limit. Under the 401(k) plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan’s trustee as directed by participants. Our 401(k) plan provides for discretionary matching of employee contributions.

 

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Limitation of Liability and Indemnification of Directors and Officers

Our restated certificate of incorporation contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. 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 for liability:

 

    for any breach of their duty of loyalty to our company or our stockholders;

 

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

 

    unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

 

    for any transaction from which they derived an improper personal benefit.

Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.

Our amended and restated bylaws provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit or proceeding by reason of the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise. Our amended and restated bylaws provide that we may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit or proceeding by reason of the fact that he or she is or was one of our employees or agents or is or was serving at our request as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Our amended and restated bylaws also provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to very limited exceptions.

We have entered into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service to us. Subject to certain exceptions, these indemnification agreements also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.

The limitation of liability and indemnification provisions in our restated certificate of incorporation and amended and restated bylaws or in these indemnification agreements may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. 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 as required by these indemnification provisions. At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, 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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We have obtained insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and officers against losses arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these officers and directors pursuant to our indemnification obligations or otherwise as a matter of law.

Certain of our non-employee directors, through their relationships with their employers, are insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of directors.

The underwriting agreement provides for indemnification by the underwriters of us and our officers, directors and employees for certain liabilities arising under the Securities Act or otherwise.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In addition to the compensation arrangements, including employment, termination of employment and change of control arrangements and indemnification arrangements, discussed, when required, above in the sections entitled “Management” and “Executive Compensation,” and the voting rights in our amended and restated voting agreement described above under “Management—Board of Directors Composition,” the following is a description of each transaction since January 1, 2012 and each currently proposed transaction in which:

 

    we have been or are to be a participant;

 

    the amount involved exceeded or exceeds $120,000; and

 

    any of our directors, executive officers or beneficial owners of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals, had or will have a direct or indirect material interest.

Series D Convertible Preferred Stock Financing

In August 2012, we sold an aggregate of 446,565 shares of our Series D convertible preferred stock at a purchase price of $31.35 per share for an aggregate purchase price of approximately $14.0 million. Of such shares, 5% beneficial owners purchased the following amounts: 70,697 shares, ARCH Venture Fund VI, L.P.; 55,583 shares, ATA Ventures II, L.P.; 813 shares, ATA Affiliates Fund II, L.P.; 161 shares, ATA Investment Fund II, L.P.; 44,438 shares, Harris & Harris Group, Inc.; 16,601 shares, Adams Street 2006 Direct Fund, L.P; 18,747 shares, Adams Street 2007 Direct Fund, L.P.; 39,196 shares, Applied Ventures, LLC; 33,665 shares, Microchip Technology Incorporated; and 34,732 shares, Serge Dassault. Each share of our Series D convertible preferred stock will convert automatically into 1.0330576 shares of our common stock upon the completion of this offering.

Convertible Note and Series D-1 and Series E Convertible Preferred Stock Financing

In August 2013, we sold an aggregate of 222,668 shares of our Series D-1 convertible preferred stock and 526,799 shares of our Series E convertible preferred stock, in each case, at a purchase price of $23.51 per share for an aggregate purchase price of approximately $17.6 million. The shares of Series D-1 convertible preferred stock were issued upon conversion in full of convertible notes in an aggregate principal amount of $5,000,000. These notes had an annual interest rate of 8% and a maturity rate of July 16, 2013. The following amounts of principal and interest were converted into Series D-1 convertible preferred stock by 5% beneficial owners: $1,119,586.98, ARCH Venture Fund VI, L.P.; $880,237.16, ATA Ventures II, L.P.; $12,879.74, ATA Affiliates Fund II, L.P.; $2,552.61, ATA Investment Fund II, L.P.; $703,740.36, Harris & Harris Group, Inc.; $262,903.39, Adams Street 2006 Direct Fund, L.P.; $296,890.06, Adams Street 2007 Direct Fund, L.P.; $620,723.38, Applied Ventures, LLC; $550,037.19, Serge Dassault; and $184,174.30, Altera Corporation. Of such shares of Series E convertible preferred stock, 5% beneficial owners purchased the following amounts: 106,326 shares, ARCH Venture Fund VI, L.P.; 41,797 shares, ATA Ventures II, L.P.; 611 shares, ATA Affiliates Fund II, L.P.; 121 shares, ATA Investment Fund II, L.P.; 106,326 shares, Harris & Harris Group, Inc.; 26,695 shares, Adams Street 2006 Direct Fund, L.P; 30,146 shares, Adams Street 2007 Direct Fund, L.P.; 106,326 shares, Applied Ventures, LLC; 44,656 shares, Serge Dassault; 63,795 shares, Altera Corporation. Each share of our Series D-1 convertible preferred stock will convert automatically into one share of our common stock upon the completion of this offering and each share of our Series E convertible preferred stock will convert automatically into 9.8841 shares of our common stock upon the completion of this offering.

Amended and Restated Investors’ Rights Agreement

We have entered into an amended and restated investors’ rights agreement with certain holders of our convertible preferred stock, including entities with which certain of our directors are affiliated. These

 

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stockholders are entitled to rights with respect to the registration of their shares following our initial public offering under the Securities Act. For a description of these registration rights, see “Description of Capital Stock—Registration Rights.”

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements and our amended and restated bylaws require us to indemnify our directors to the fullest extent not prohibited by Delaware law. Subject to certain limitations, our amended and restated bylaws also require us to advance expenses incurred by our directors and executive officers. For more information regarding these agreements, see “Executive Compensation—Limitation of Liability and Indemnification of Directors and Officers.”

Review, Approval or Ratification of Transactions With Related Parties

Prior to this offering we had no formal, written policy or procedure for the review and approval of related party transactions; however, our practice has been that all related party transactions are reviewed and approved by a majority of the disinterested members of our board of directors.

We will adopt, effective upon the consummation of this offering, a formal written policy that requires audit committee approval of transactions to which we are a party and in which an officer, director, nominee for director, stockholder beneficially owning more than five percent of our outstanding capital stock, an immediate family member of such person, or any firm, corporation or other entity in which any of the foregoing persons is employed, is a general partner or principal or in a similar position, or in which such person has a five percent or greater beneficial ownership interest, has a material interest. In approving or rejecting any such transaction, our audit committee is to consider the relevant facts and circumstances available and deemed relevant to our audit committee, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. Under the policy, certain transactions will not require audit committee approval, including certain employment arrangements of executive officers, director compensation, transactions with another company at which a related party’s only relationship is as a non-executive employee or beneficial owner of less than five percent of that company’s shares, transactions where a related party’s interest arises solely from the ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis, and transactions available to all employees generally.

 

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PRINCIPAL STOCKHOLDERS

The following table presents information with respect to the beneficial ownership of our common stock as of September 30, 2015, and as adjusted to reflect the sale of common stock in this offering assuming no exercise of the underwriters’ over-allotment option to purchase additional shares, by:

 

    each person known by us to be the beneficial owner of more than 5% of our common stock;

 

    each of our directors;

 

    each of our named executive officers; and

 

    all of our directors and executive officers as a group.

We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our common stock subject to options and warrants that are currently exercisable or exercisable within 60 days of September 30, 2015 to be outstanding and to be beneficially owned by the person holding the option or warrant for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person.

We have based percentage ownership of our common stock before this offering on 9,680,245 shares of our common stock outstanding on September 30, 2015, which includes 9,114,739 shares of common stock resulting from the automatic conversion of all outstanding shares of our convertible preferred stock upon the closing of this offering, as if this conversion had occurred as of September 30, 2015. Percentage ownership of our common stock after this offering also assumes our sale of 4,100,000 shares of common stock in this offering and the issuance of 165,741 shares of common stock that we expect to issue upon the net exercise of warrants that would expire if not exercised prior to the completion of this offering based on the assumed initial public offering price of $11.00 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus. Unless otherwise indicated, the address of each of the individuals and entities named below that owns 5% or more of our common stock is c/o Adesto Technologies Corporation, 1250 Borregas Avenue, Sunnyvale, California 94089.

 

     Shares
Beneficially

Owned
     Percentage of Shares
Beneficially Owned
 

Name of Beneficial Owner

      Before
Offering
    After
Offering
 

Named executive officers and directors:

       

Narbeh Derhacobian (1)

     298,632         3.1     2.1

Ron Shelton (2)

     86,381         *        *   

Shane Hollmer (3)

     84,174         *        *   

Alexei Andreev (4)

     1,569,868         16.2        11.3   

Nelson Chan (5)

     19,365         *        *   

Barry Cox (6)

     12,797         *        *   

Keith Crandell (7)

     1,876,511         19.4        13.5   

Francis Lee (8)

     1,010         *       
*
  

Kevin Palatnik (9)

     757         *        *   

All executive officers and directors as a group (12 persons) (10)

     4,119,247         40.9     28.7

5% Stockholders:

       

ARCH Venture Fund VI, L.P. (11)

     1,876,511         19.4     13.5

Harris & Harris Group, Inc. (12)

     1,569,868         16.2        11.3   

Applied Ventures, LLC (13)

     1,508,651         15.6        10.8   

Entities affiliated with ATA Ventures (14)

     1,080,813         11.2        7.7   

Entities affiliated with Adams Street (15)

     974,605         10.1        7.0   

Serge Dassault

     846,977         8.8        6.1   

Altera Corporation (16)

     770,197         8.0        5.5   

 

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* Represents beneficial ownership of less than 1% of our outstanding shares of common stock.
(1) Represents (i) 212,323 shares held by Mr. Derhacobian and (ii) 86,309 shares subject to options held by Mr. Derhacobian that are exercisable within 60 days of September 30, 2015.
(2) Represents 86,381 shares subject to options held by Mr. Shelton that are exercisable within 60 days of September 30, 2015.
(3) Represents (i) 10,101 shares held by Mr. Hollmer and (ii) 74,073 shares subject to options held by Mr. Hollmer that are exercisable within 60 days of September 30, 2015.
(4) Represents 1,569,868 shares held by Harris & Harris Group, Inc. as noted in footnote 12. Alexei Andreev, one of our directors, is an executive vice president and managing director of Harris & Harris Group, Inc. Thus, Mr. Andreev may be deemed to share voting and investment power over the shares held by Harris & Harris Group, Inc.
(5) Represents 19,365 shares subject to options held by Mr. Chan that are exercisable within 60 days of September 30, 2015.
(6) Represents 12,797 shares subject to options held by Mr. Cox that are exercisable within 60 days of September 30, 2015.
(7) Represents 1,876,511 shares held by ARCH Venture Fund VI, L.P. as noted in footnote 11. Keith L. Crandell, one of our directors, is a managing director of ARCH Venture Partners VI, LLC, the sole general partner of ARCH Venture Partners VI, L.P., the sole general partner of ARCH Venture Fund VI, L.P., and may be deemed to share voting and investment power over the shares held by ARCH Venture Fund VI, L.P.
(8) Represents 1,010 shares subject to options held by Mr. Lee that are exercisable within 60 days of September 30, 2015.
(9) Represents 757 shares subject to options held by Mr. Palatnik that are exercisable within 60 days of September 30, 2015.
(10) Represents (i) 3,734,136 shares and (ii) 385,111 shares subject to options that are exercisable within 60 days of September 30, 2015 held by our directors and executive officers as a group.
(11) Represents 1,876,511 shares held by ARCH Venture Fund VI, L.P. ARCH Venture Partners VI, L.P. is the sole general partner of ARCH Venture Fund VI, L.P., and may be deemed to beneficially own certain of the shares held of record by ARCH Venture Fund VI, L.P. ARCH Venture Partners VI, L.P. disclaims beneficial ownership of all shares held of record by ARCH Venture Fund VI, L.P. in which ARCH Venture Partners VI, L.P. does not have an actual pecuniary interest. ARCH Ventures Partners VI, LLC, as the sole general partner of ARCH Venture Partners VI, L.P., may be deemed to beneficially own certain of the shares held of record by ARCH Venture Fund VI, L.P. ARCH Venture Partners VI, LLC disclaims beneficial ownership of all shares held of record by ARCH Venture Fund VI, L.P. in which ARCH Venture Partners VI, LLC does not have an actual pecuniary interest. Clinton W. Bybee, Keith L. Crandell and Robert T. Nelsen are the managing directors of ARCH Venture Partners VI, LLC and may be deemed to share voting and investment power over the shares held by ARCH Venture Fund VI, L.P. The managing directors disclaim beneficial ownership of all shares held of record by ARCH Venture Fund VI, L.P. in which they do not have an actual pecuniary interest. Mr. Crandell is a member of our board of directors. The address for ARCH Venture Fund VI, L.P. is 8725 W. Higgins Road, Suite 290, Chicago, Illinois 60631.
(12) Represents 1,569,868 shares held by Harris & Harris Group, Inc. Harris & Harris Group, Inc. is a public venture capital firm. Mr. Andreev is a member of our board of directors and an executive officer of Harris & Harris Group, Inc. All shares held by Harris & Harris Group, Inc. are subject to a pledge in favor of ORIX Corporate Capital, Inc. under a loan facility. The address for Harris & Harris Group, Inc. is 1450 Broadway, 24 th Floor, New York, New York 10018.
(13) Represents 1,508,651 shares held by Applied Ventures, LLC. Applied Ventures, LLC is the venture capital arm of Applied Materials, Inc., a public company. J. Christopher Moran, Dr. Omkaran Nalamasu, Dr. Mark R. Pinto and Larry Sparks, in their capacity as members of the Venture Investment Committee of Applied Materials, Inc., have shared voting and investment power over shares held by Applied Ventures, LLC; however, Messrs. Moran and Sparks, and Drs. Nalamasu and Pinto disclaim beneficial ownership of these shares. The address for Applied Ventures, LLC is 3050 Bower Ave., MS 0105, Santa Clara, California 95054.
(14) Represents (i) 1,062,205 shares held by ATA Ventures II, L.P., (ii) 15,533 shares held by ATA Affiliates Fund II, L.P. and (iii) 3,075 shares held by ATA Investment Fund II, L.P. ATA Management II, LLC is the general partner of ATA Ventures II, L.P., ATA Affiliates Fund II, L.P. and ATA Investment Fund II, L.P., and may be deemed to beneficially own certain of the shares held of record by ATA Ventures II, L.P., ATA Affiliates Fund II, L.P. and ATA Investment Fund II, L.P. Hatch Graham, Michio Fujimura, and T. Peter Thomas are the managing directors of ATA Management II, LLC and may be deemed to share voting and investment power over the shares held by ATA Ventures II, L.P., ATA Affiliates Fund II, L.P. and ATA Investment Fund II, L.P. The principal address for each of the ATA Ventures Entities is 4300 El Camino Real, Suite 205, Los Altos, California 94022.
(15) Represents (i) 457,717 shares held by Adams Street 2006 Direct Fund, L.P. and (ii) 516,888 shares held by Adams Street 2007 Direct Fund, L.P. Adams Street Partners, LLC is the managing member and general partner of Adams Street 2006 Direct Fund, L.P. and Adams Street 2007 Direct Fund, L.P., and may be deemed to have sole voting and investment power over the shares held by Adams Street 2006 Direct Fund, L.P. and Adams Street 2007 Direct Fund, L.P. Thomas D. Berman, David Brett, Jeffrey T. Diehl, Elisha P. Gould, III, Robin P. Murray, Sachin Tulyani, Craig D. Waslin and David S. Welsh, each of whom is a partner of Adams Street Partners, LLC (or a subsidiary thereof), may be deemed to share voting and investment power over the shares held by Adams Street 2006 Direct Fund, L.P. and Adams Street 2007 Direct Fund, L.P. The principal address for each of the Adams Street Entities is 2500 Sand Hill Road, Suite 100, Menlo Park, California 94025.
(16) Represents 770,197 shares held by Altera Corporation. The address for Altera Corporation is 101 Innovation Drive, San Jose, California 95134.

 

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DESCRIPTION OF CAPITAL STOCK

The following description summarizes the most important terms of our capital stock, as they will be in effect upon the closing of this offering. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our restated certificate of incorporation and amended and restated bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law. For a description of registration rights held by certain holders of our capital stock and the duration of those rights see “Registration Rights” below. Upon the closing of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, $0.0001 par value per share, and 5,000,000 shares of undesignated preferred stock, $0.0001 par value per share.

Assuming the conversion of all outstanding shares of our convertible preferred stock into shares of our common stock, which will occur immediately following the closing of this offering, as of June 30, 2015, there were 9,678,880 shares of our common stock outstanding, held by 37 stockholders of record, and no shares of our preferred stock outstanding.

Common Stock

Dividend Rights

Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See “Dividend Policy” above.

Voting Rights

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. We have not provided for cumulative voting for the election of directors in our restated certificate of incorporation. Our restated certificate of incorporation establishes a classified board of directors, to be divided into three classes with staggered three-year terms. Only the directors in one class will be subject to election by a plurality of the votes cast at each annual meeting of our stockholders, with the directors in the other classes continuing for the remainder of their respective three-year terms.

No Preemptive or Similar Rights

Our common stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.

Right to Receive Liquidation Distributions

Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.

Fully Paid and Non-Assessable

All of the outstanding shares of our common stock are, and the shares of our common stock to be issued pursuant to this offering will be, fully paid and non-assessable.

 

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Preferred Stock

Following this offering, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue up to 5,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control of our company and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock.

Options

As of June 30, 2015, there were outstanding options to purchase an aggregate of 744,855 shares of our common stock, with a weighted-average exercise price of $1.92 per share, pursuant to our 2007 Equity Incentive Plan. In addition, to address the dilution of our employees’ equity interests in our company as a result of the conversion of the Series E convertible preferred stock in connection with this offering, our board of directors has authorized the grant, effective upon the closing of this offering, to our employees of restricted stock units equal to the number of outstanding options held by them on the grant date, which based on the number of options outstanding as of the date of this prospectus would be an aggregate of approximately 0.89 million restricted stock units. Each of these restricted stock units will vest over two years, with one-half of the underlying shares vesting one-year after the grant date and one eighth of the underlying shares vesting at the end of each three-month period thereafter.

Warrants

As of June 30, 2015, there were outstanding warrants to purchase 218,618 shares of common stock that will expire if not exercised prior to the completion of this offering and outstanding warrants to purchase shares of our capital stock as follows:

 

Type of Capital Stock

   Total Number of
Shares

Subject to
Warrants
     Exercise Price
Per Share
   Expiration Dates

Series B convertible preferred stock

     7,378       $12.20    Feb. 2017

Series D convertible preferred stock

     71,769       $31.35    Sep. 2019

Series E convertible preferred stock

     33,385       $23.51    Apr. 2022; Oct. 2024

We expect all warrants that would expire if not exercised prior to the completion of this offering will be exercised immediately prior to this offering. Immediately following the closing of this offering, the warrants to purchase shares of our Series B, Series D and Series E convertible preferred stock that remain outstanding will convert automatically into warrants to purchase the shares of our common stock as follows: 7,378 – Series B; 71,769 – Series D; and 329,981 – Series E. The exercise prices of these warrants may be paid either in cash or by surrendering the right to receive shares of our common stock having a value equal to the exercise price.

Registration Rights

Following the completion of this offering, after giving effect to the issuance of 165,741 shares of common stock that we expect to issue upon the net exercise of warrants that would expire if not exercised prior to the

 

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completion of this offering, the holders of approximately 9.6 million shares of our common stock will be entitled to rights with respect to the registration of these shares under the Securities Act. These rights are provided under the terms of an amended and restated investors’ rights agreement between us and the holders of these shares, which was entered into in connection with our convertible preferred stock financings, and include demand, Form S-3 and piggyback registration rights.

Demand Registration Rights

As of June 30, 2015, the holders of an aggregate of approximately 9.6 million shares of our common stock or their permitted transferees were entitled to demand registration rights. At any time after 180 days from the date of this offering, the holders of at least 40% of the then-outstanding shares subject to registration rights can request that we file a registration statement covering registrable securities with an anticipated aggregate offering price of at least $5.0 million. We are only required to file two registration statements that are declared effective pursuant to these demand registration rights. We may postpone the filing of a registration statement for up to 90 days once in a 12-month period if our board of directors determines that the filing would be materially detrimental to us and our stockholders.

Piggyback Registration Rights

As of June 30, 2015, the holders of an aggregate of approximately 9.6 million shares of our common stock or their permitted transferees were entitled to piggyback registration rights. If we register any of our securities for public sale, holders of shares having registration rights will have the right to include their shares in the registration statement. However, this right does not apply to a registration relating to sales of shares of participants in one of our stock plans, 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 shares having registration rights or a registration in which the only common stock being registered is common stock issuable upon conversion of debt securities that are also being registered. The underwriters of any underwritten offering will have the right, in their sole discretion, to limit, because of marketing reasons, the number of shares registered by these holders, in which case the number of shares to be registered will be apportioned pro rata among these holders, according to the total amount of securities entitled to be included by each holder, or in a manner mutually agreed upon by the holders. However, the number of shares to be registered by these holders cannot be reduced below 33% of the total shares covered by the registration statement.

Form S-3 Registration Rights

As of June 30, 2015, the holders of an aggregate of approximately 9.6 million shares of our common stock or their permitted transferees were entitled to Form S-3 registration rights. The holders of then-outstanding shares having registration rights can request that we register all or part of their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public, net of underwriters’ discounts and commissions, of the shares offered is at least $1 million. The stockholders may only require us to effect two registration statements on Form S-3 in a 12-month period. We may postpone the filing of a registration statement on Form S-3 for up to 90 days once in a 12-month period if our board of directors determines that the filing would be materially detrimental to us and our stockholders.

Expenses of Registration Rights

We generally will pay all expenses, other than underwriting discounts and commissions and the reasonable fees and disbursements of more than one counsel for the selling stockholders, incurred in connection with the registrations described above.

 

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Expiration of Registration Rights

The registration rights described above will expire, with respect to any particular holder of these rights, on the earlier of the seventh anniversary of the closing of this offering or when that holder can sell all of its registrable securities in any three month period without restriction under Rule 144 of the Securities Act.

Anti-Takeover Provisions

The provisions of Delaware law, our restated certificate of incorporation and our amended and restated bylaws may have the effect of delaying or discouraging another person from acquiring control of our company. These provisions, which are summarized below, may have the effect of discouraging takeover bids. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first 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 a proposal to acquire us.

Delaware Law

We are governed by the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales or other transactions resulting in a financial benefit to the stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s outstanding voting stock. These provisions may have the effect of delaying, deferring or preventing a change in our control.

Restated Certificate of Incorporation and Amended and Restated Bylaw Provisions

Our restated certificate of incorporation and our amended and restated bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our management team, including the following:

 

    Board of Directors Vacancies . Our restated certificate of incorporation and amended and restated bylaws authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors is permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management.

 

    Classified Board . Our restated certificate of incorporation and amended and restated bylaws provide that our board is classified into three classes of directors. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors. See “Management—Board of Directors Composition.”

 

    Stockholder Action; Special Meeting of Stockholders . Our restated certificate of incorporation provides that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our amended and restated bylaws. Our amended and restated bylaws further provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairman of our board of directors, our chief executive officer or our president, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.

 

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    Advance Notice Requirements for Stockholder Proposals and Director Nominations . Our amended and restated bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our amended and restated bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

 

    No Cumulative Voting . The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation and amended and restated bylaws do not provide for cumulative voting.

 

    Directors Removed Only for Cause . Our restated certificate of incorporation provides that stockholders may remove directors only for cause and only with the approval of holders of at least two-thirds of our outstanding common stock.

 

    Amendment of Charter Provisions . Any amendment of the above provisions in our restated certificate of incorporation would require approval by holders of at least two-thirds of our outstanding common stock.

 

    Issuance of Undesignated Preferred Stock . Our board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or other means.

 

    Choice of Forum . Our restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.

Listing

We have applied to list our common stock on the NASDAQ Global Market under the symbol “IOTS”.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.. The transfer agent’s address is 250 Royall Street, Canton, Massachusetts 02021.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options or warrants, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.

Following the closing of this offering, based on the number of shares of our capital stock outstanding as of June 30, 2015, we will have a total of 13,944,621 shares of our common stock outstanding. Of these outstanding shares, all of the 4,100,000 shares of common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act, would only be able to be sold in compliance with the Rule 144 limitations described below.

The remaining outstanding shares of our common stock will be deemed “restricted securities” as defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below. In addition, our security holders have entered into market standoff agreements with us or lock-up agreements with the underwriters under which they have agreed, subject to specific exceptions, not to sell any of our stock for at least 180 days following the date of this prospectus, as described below. As a result of these agreements and subject to the provisions of Rule 144 or Rule 701, based on an assumed offering date of June 30, 2015, shares will be available for sale in the public market as follows:

 

    Beginning on the date of this prospectus, the 4,100,000 shares sold in this offering will be immediately available for sale in the public market; and

 

    Beginning 181 days after the date of this prospectus, subject to extension as described in the section entitled “Underwriting” below, 9,844,621 additional shares will become eligible for sale in the public market, of which 5,242,787 shares will be held by affiliates and subject to the volume and other restrictions of Rule 144, as described below.

Lock-Up/Market Standoff Agreements

All of our directors, officers and the holders of substantially all of our outstanding stock, stock options and warrants are subject to lock-up agreements or market standoff provisions that, subject to exceptions described in the section entitled “Underwriting” below, prohibit them from offering for sale, selling, contracting to sell, granting any option for the sale of, transferring or otherwise disposing of any shares of our common stock, options or warrants to acquire shares of our common stock or any security or instrument related to our common stock and options or warrants to acquire shares of our common stock for a period of at least 180 days following the date of this prospectus without the prior written consent of Needham & Company, LLC and Oppenheimer & Co. Inc.

Rule 144

In general, under Rule 144 as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for

 

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at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.

In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up and market standoff agreements described above, 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 139,446 shares immediately after this offering; or

 

    the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.

Stock Options

As soon as practicable after the closing of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act covering all of the shares of our common stock subject to outstanding options and the shares of our common stock reserved for issuance under our stock plans. However, the shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice and public information requirements of Rule 144 and will not be eligible for resale until expiration of the lock-up and market standoff agreements to which they are subject.

Warrants

As of June 30, 2015, after giving effect to the issuance of 165,741 shares of common stock that we expect to issue upon the exercise of warrants that would expire if not exercised prior to the completion of this offering, we had outstanding warrants that, following the closing of this offering, will entitle their holders to purchase 411,499 shares of common stock at a weighted-average exercise price of $24.72.

Registration Rights

We have granted demand, piggyback and Form S-3 registration rights to certain of our stockholders to sell our common stock. Registration of the sale of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. For a further description of these rights, see “Description of Capital Stock—Registration Rights.”

 

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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK

The following summary describes the material U.S. federal income tax considerations of the acquisition, ownership and disposition of our common stock by “non-U.S. holders” (as described below under the heading “—Non-U.S. Holder Defined”). This summary does not address all aspects of U.S. federal income tax considerations relating thereto. This summary also does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, or under U.S. federal gift and estate tax laws, except to the limited extent provided below.

Special rules different from those described below may apply to certain non-U.S. holders that are subject to special treatment under the Code, including, without limitation:

 

    banks, insurance companies or other financial institutions;

 

    partnerships or entities or arrangements treated as partnerships or other pass-through entities for U.S. federal tax purposes (or investors in such entities);

 

    corporations that accumulate earnings to avoid U.S. federal income tax;

 

    persons subject to the alternative minimum tax or Medicare contribution tax;

 

    tax-exempt entities (including private foundations) or tax-qualified retirement plans;

 

    controlled foreign corporations or passive foreign investment companies;

 

    persons who acquired our common stock as compensation for services;

 

    dealers in securities or currencies;

 

    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 5% of our capital stock (except to the extent specifically set forth below);

 

    U.S. expatriates, certain former citizens or long-term residents of the United States;

 

    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 Code (generally, for investment purposes); or

 

    persons deemed to sell our common stock under the constructive sale provisions of the Code.

In addition, if a partnership or an entity or an arrangement 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 in the partnership or an owner of the entity will depend upon the status of the partner or other owner and the activities of the partnership or other entity. Therefore, this summary does not address tax considerations applicable to partnerships that hold our common stock, and partners in such partnerships should consult their tax advisors.

This summary also does not address tax considerations applicable to entities that are disregarded for U.S. federal income tax purposes (regardless of their place of organization or formation).

The information provided below is based upon provisions of the Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions as of the date hereof. Such authorities may be subject to differing interpretations, repealed, revoked or modified, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those discussed below. We have not requested a 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 not take a contrary position regarding the tax

 

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consequences of the acquisition, ownership and disposition of our common stock, or that any such contrary position would not be sustained by a court. In either case, the tax considerations of owning or disposing of our common stock could differ from those described below and as a result, we cannot assure you that the tax consequences described in this discussion will not be challenged by the IRS or will be sustained by a court if challenged by the IRS.

INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE OR LOCAL LAWS, AND TAX TREATIES.

Non-U.S. Holder Defined

For purposes of this summary, a “non-U.S. holder” is any beneficial owner of our common stock, other than a partnership, that is not:

 

    an individual who is a citizen or resident of the United States (as determined under U.S. federal income tax rules);

 

    a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state therein or the District of Columbia;

 

    a trust if it (1) is subject to the primary supervision of a court within the United States and one of more U.S. persons have authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

    an estate whose income is subject to U.S. income tax regardless of its source.

If you are a non-U.S. citizen that is an individual, you may, in some cases, be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year, are counted.

Resident aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the ownership or disposition of our common stock.

Distributions

We do not expect to declare or make any distributions on our common stock in the foreseeable future. If we do make distributions on our common stock, however, such distributions will generally constitute dividends for U.S. federal income tax purposes to the extent it is paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a non-U.S. holder’s adjusted tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our common stock as described below under the heading “—Gain on Disposition of our Common Stock.” The amount of any distribution of property other than cash will be the fair market value of that property on the date of distribution.

Any distribution on our common stock that is treated as a dividend paid to a non-U.S. holder that is not effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States will generally be subject to U.S. withholding tax at a 30% rate or such lower rate as may be specified under the terms of an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax

 

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treaty. Generally, in order for us or our paying agent to withhold tax at a lower treaty rate, a non-U.S. holder must certify its entitlement to treaty benefits. A non-U.S. holder generally can meet this certification requirement by providing a properly executed IRS Form W-8BEN (or any successor form) or appropriate substitute form to us or our paying agent. In the case of a non-U.S. holder that is an entity, Treasury Regulations and the relevant tax treaty provide rules to determine whether, for purposes of determining the applicability of a tax treaty, dividends will be treated as paid to the entity or to those holding an interest in that entity. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to the agent. The holder’s agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. For payments made to a partnership or other pass-through entity, the certification requirements generally apply to the partners or other owners rather than to the partnership or other entity, and the partnership or other entity must provide the partners’ or other owners’ documentation to us or our paying agent. A non-U.S. holder that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty with the United States may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS in a timely manner.

Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder, and if required by an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence, are attributable to a permanent establishment maintained by the non-U.S. holder in the United States, are not subject to U.S. withholding tax. To obtain this exemption, a non-U.S. holder must provide us or our paying agent with a properly executed IRS Form W-8ECI certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition to being taxed at graduated income tax rates, dividends received by corporate non-U.S. holders that are effectively connected with a U.S. trade or business of the corporate non-U.S. holder may also be subject to an additional “branch profits tax,” which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable tax treaty) on the corporate non-U.S. holder’s effectively connected earnings and profits, subject to certain adjustments.

For additional withholding rules that may apply to dividends paid to certain foreign entities, see the discussion below under the heading “—Foreign Accounts.”

Gain on Disposition of our Common Stock

Subject to the discussions below under the heading “—Backup Withholding and Information Reporting” and “—Foreign Accounts,” non-U.S. holders will generally not be subject to U.S. federal income tax on gain realized on the sale, exchange or other disposition of our common stock unless:

 

  (a) the gain is effectively connected with the conduct by the non-U.S. holder of a U.S. trade or business and if required by an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States;

 

  (b) the non-U.S. holder is a nonresident individual and is present in the United States for 183 days or more in the taxable year of the sale, exchange or other disposition of our common stock, and certain other requirements are met; or

 

  (c) the rules of the Foreign Investment in Real Property Tax Act, or FIRPTA, apply to treat the gain as effectively connected with a U.S. trade or business.

A non-U.S. holder described in (a) above, will generally be required to pay tax on the net gain derived from the sale, exchange or other disposition of our common stock at regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in (a) above may be subject to the additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

 

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An individual non-U.S. holder described in (b) above, will be required to pay a flat 30% tax on the gain derived from the sale, exchange or other disposition of our common stock, or such other reduced rate as may be specified by an applicable income tax treaty, which gain may be offset by U.S. source capital losses (even though the non-U.S. holder is not considered a resident of the United States).

With respect to (c) above, in general, the FIRPTA rules may apply to a sale, exchange or other disposition of our common stock if we are, or were within the shorter of the five-year period preceding the disposition and the non-U.S. holder’s holding period, a U.S. real property holding corporation, or a USRPHC. In general, we would be a USRPHC if the fair market value of property interests that we hold equals or exceeds 50% of the sum of the fair market values of our (i) U.S. real property interests, (ii) interests in real property located outside of the United States; and (iii) other assets that we use or hold for use in our trade or business. We do not believe that we are a USRPHC and we do not anticipate becoming a USRPHC; however, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, gain realized by a non-U.S. holder on a disposition of our common stock will not be subject to U.S. federal income tax as long as (1) our common stock is regularly traded on an established securities market, and (2) the non-U.S. holder owned, directly, indirectly and constructively, no more than 5% of our outstanding common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the holder’s holding period. There can be no assurance that our common stock will qualify as regularly traded on an established securities market.

For additional withholding rules that may apply to proceeds of a disposition of our common stock paid to certain foreign entities, see the discussion below under the heading “—Foreign Accounts.”

U.S. Federal Estate Tax

The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and therefore will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise. Investors are urged to consult their own tax advisors regarding the U.S. federal estate tax consequences of the ownership or disposition of our common stock.

Backup Withholding and Information Reporting

The Code and the Treasury regulations require those who make specified payments to report the payments to the IRS. Among the specified payments are dividends and proceeds paid by brokers to their customers. The required information returns enable the IRS to determine whether the recipient properly included the payments in income. This reporting regime is reinforced by “backup withholding” rules. These rules require the payors to withhold tax from payments subject to information reporting if the recipient fails to comply with the reporting requirements by failing to provide his taxpayer identification number or other certification of exempt status to the payor, furnishing an incorrect identification number, or failing to report interest or dividends on his returns. The backup withholding tax rate is currently 28%. The backup withholding rules do not apply to payments to corporations, whether domestic or foreign, provided they establish such exemption.

Payments to non-U.S. holders of dividends on common stock generally will not be subject to backup withholding, so long as the non-U.S. holder certifies its nonresident status (and we or our paying agent do not have actual knowledge or reason to know the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied) or otherwise establishes an exemption. U.S. backup withholding generally will not apply to a non-U.S. holder who provides a properly executed applicable IRS Form W-8 or otherwise establishes an exemption. We must report annually to the IRS any dividends paid to each non-U.S. holder and the tax withheld, if any, with respect to these dividends. Copies of these reports may be made available to tax authorities in the country where the non-U.S. holder resides.

Under the Treasury regulations, the payment of proceeds from the disposition of shares of our common stock by a non-U.S. holder made to or through a U.S. office of a broker generally will be subject to information

 

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reporting and backup withholding unless the beneficial owner certifies, under penalties of perjury, among other things, its status as a non-U.S. holder (and the broker does not have actual knowledge or reason to know the holder is a U.S. person) or otherwise establishes an exemption. The payment of proceeds from the disposition of shares of our common stock by a non-U.S. holder made to or through a non-U.S. office of a broker generally will not be subject to backup withholding and information reporting, except as noted below. Information reporting, but not backup withholding, will apply to a payment of proceeds, even if that payment is made outside of the United States, if a non-U.S. holder sells our common stock through a non-U.S. office of a broker that is:

 

    a U.S. person (including a foreign branch or office of such person);

 

    a “controlled foreign corporation” for U.S. federal income tax purposes;

 

    a foreign person 50% or more of whose gross income from certain periods is effectively connected with a U.S. trade or business; or

 

    a foreign partnership if at any time during its tax year (a) one or more of its partners are U.S. persons who, in the aggregate, hold more than 50% of the income or capital interests of the partnership or (b) the foreign partnership is engaged in a U.S. trade or business,

unless the broker has documentary evidence that the beneficial owner is a non-U.S. holder and certain other conditions are satisfied, or the beneficial owner otherwise establishes an exemption (and the broker has no actual knowledge or reason to know to the contrary).

Backup withholding is not an additional tax. Any amounts withheld from a payment to a holder of common stock under the backup withholding rules can be credited against any U.S. federal income tax liability of the holder and may entitle the holder to a refund, provided that the required information is furnished to the IRS in a timely manner.

Foreign Accounts

A U.S. federal withholding tax of 30% may apply to dividends and the gross proceeds of a disposition of our common stock paid to a foreign financial institution (as specifically defined by the applicable rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities (or, where permitted by an applicable intergovernmental agreement, to the local tax authorities) substantial information regarding U.S. account holders of such institution (which includes certain equity holders of such institution, as well as certain account holders that are foreign entities with U.S. owners). This U.S. federal withholding tax of 30% will also apply on dividends and the gross proceeds of a disposition of our common stock paid to a non-financial foreign entity unless such entity provides the withholding agent with either a certification that it does not have any substantial direct or indirect U.S. owners or provides information regarding direct and indirect U.S. owners of the entity. The 30% federal withholding tax described in this paragraph cannot be reduced under an income tax treaty with the United States or by providing an IRS Form W-8BEN or similar documentation. The withholding tax described above will not apply if the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from the rules. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. Holders should consult with their own tax advisors regarding the possible implications of the withholding described herein.

The withholding provisions described above generally apply to payments of gross proceeds from a sale or other disposition of our common stock that occurs after January 1, 2017, and to payments of dividends. THE PRECEDING DISCUSSION OF U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION PURPOSES ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, GIFT, ESTATE, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

 

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UNDERWRITING

We have entered into an underwriting agreement with the underwriters named below. Needham & Company, LLC and Oppenheimer & Co. Inc. are acting as representatives of the underwriters.

The underwriting agreement provides for the purchase of a specific number of shares of common stock by each of the underwriters. The underwriters’ obligations are several, which means that each underwriter is required to purchase a specified number of shares of common stock, but is not responsible for the commitment of any other underwriter to purchase shares of common stock. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of shares of common stock set forth opposite its name below:

 

Underwriter

   Number of
Shares
 

Needham & Company, LLC

  

Oppenheimer & Co. Inc.

  

Roth Capital Partners, LLC

  
  

 

 

 

Total

     4,100,000   
  

 

 

 

The underwriters have agreed to purchase all of the shares of common stock offered by this prospectus (other than those covered by the over-allotment option described below) if any are purchased. Under the underwriting agreement, if an underwriter defaults in its commitment to purchase shares of common stock, the commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated, depending on the circumstances.

The underwriters are offering the shares of common stock subject to various conditions and may reject all or part of any order. The representatives have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price that appears on the cover page of this prospectus. In addition, the representatives may offer some of the shares of common stock to other securities dealers at such price less a concession of $         per share. The underwriters may also allow, and such dealers may reallow, a concession not in excess of $         per share to other dealers. After the shares of common stock are released for sale to the public, the representatives may change the offering price and other selling terms at various times.

We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 30 days after the date of this prospectus, permits the underwriters to purchase a maximum of 615,000 additional shares of common stock from us to cover over-allotments. If the underwriters exercise all or part of this option, they will purchase shares of common stock covered by the option at the initial public offering price that appears on the cover page of this prospectus, less the underwriting discount. The underwriters have severally agreed that, to the extent the over-allotment option is exercised, they will each purchase a number of additional shares of common stock proportionate to the underwriter’s initial amount reflected in the foregoing table.

The following table provides information regarding the amount of the discount to be paid to the underwriters by us:

 

    Per Share      Total Without
Exercise of
Over-Allotment
Option
     Total With Full
Exercise of
Over-Allotment
Option
 

Public offering price

  $                        $                        $                    

Underwriting discounts and commissions

  $         $         $     

Proceeds before expenses, to us

  $         $         $     

 

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We estimate that our total expenses of the offering, excluding the underwriting discounts and commissions, will be approximately $2,500,000. This amount includes up to $30,000 that we have agreed to reimburse the underwriters for expenses relating to the clearance of this offering with the Financial Industry Regulatory Authority, Inc.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to us and to persons and entities with relationships with us, for which they received or will receive customary fees and expenses.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We have applied to list our common stock on the NASDAQ Global Market under the symbol “IOTS”.

We, our officers and directors and substantially all other stockholders have agreed to a 180 day “lock up” with respect to substantially all of the shares of common stock and other of our securities that they beneficially own, including securities that are convertible into shares of common stock and securities that are exchangeable or exercisable for shares of common stock. This means that, subject to certain exceptions, for a period of 180 days following the date of this prospectus, we and such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the representatives.

Rules of the Securities and Exchange Commission may limit the ability of the underwriters to bid for or purchase shares before the distribution of the shares is completed. However, the underwriters may engage in the following activities in accordance with the rules:

 

    Stabilizing transactions—The representative may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the shares, so long as stabilizing bids do not exceed a specified maximum.

 

    Over-allotments and syndicate covering transactions—The underwriters may sell more shares of common stock in connection with this offering than the number of shares of common stock than they have committed to purchase. This over-allotment creates a short position for the underwriters. This short sales position may involve either “covered” short sales or “naked” short sales. Covered short sales are short sales made in an amount not greater than the underwriters’ over-allotment option to purchase additional shares of common stock in this offering described above. The underwriters may close out any covered short position either by exercising their over-allotment option or by purchasing shares of common stock in the open market. To determine how they will close the covered short position, the underwriters will consider, among other things, the price of shares of common stock available for purchase in the open market, as compared to the price at which they may purchase shares of common stock through the over-allotment option. Naked short sales are short sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares of common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that, in the open market after pricing, there may be downward pressure on the price of the shares of common stock that could adversely affect investors who purchase shares of common stock in this offering.

 

   

Penalty bids—If the representative purchases shares of common stock in the open market in a stabilizing transaction or syndicate covering transaction, they may reclaim a selling concession from the underwriters and selling group members who sold those shares of common stock as part of this offering. Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales or to stabilize the market price of our shares of common stock may have the effect of raising

 

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or maintaining the market price of our shares of common stock or preventing or mitigating a decline in the market price of our shares of common stock. As a result, the price of the shares of our common stock may be higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect on the price of the shares of common stock if it discourages resales of the shares of common stock.

Neither we nor the underwriters makes any representation or prediction as to the effect that the transactions described above may have on the price of the shares of common stock. These transactions may occur on the NASDAQ Global Market or otherwise. If such transactions are commenced, they may be discontinued without notice at any time.

Electronic Delivery of Preliminary Prospectus

A prospectus in electronic format may be delivered to potential investors by one or more of the underwriters participating in this offering. The prospectus in electronic format will be identical to the paper version of such preliminary prospectus. Other than the prospectus in electronic format, the information on any underwriter’s web site and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part.

Determination of Offering Price

Prior to the offering, there has not been a public market for our shares of common stock. Consequently, the public offering price for our shares of common stock has been determined by negotiations between us and the representatives of the several underwriters for this offering. Among the factors to be considered in these negotiations were the prevailing market conditions, our financial information, market valuations of other companies that we and the representatives believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.

We offer no assurances that the public offering price will correspond to the price at which the shares of common stock will trade in the public market subsequent to the offering or that an active trading market for the shares of common stock will develop and continue after the offering.

Notice to Non-U.S. Investors

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or a Relevant Member State, an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

  a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

 

  b) to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than €43,000,000 and (iii) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

 

  c) by the representative to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or

 

  d) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided, that no such offer of securities shall result in a requirement for the publication by us or any representative of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer 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 any securities to be offered so as to enable an investor to decide to purchase any securities,

 

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as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Each underwriter has represented, warranted and agreed that:

 

  a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000, or the FSMA, received by it in connection with the issue or sale of any securities in circumstances in which section 21(1) of the FSMA does not apply to us; and

 

  b) it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.

LEGAL MATTERS

Fenwick & West LLP, Mountain View, California, will pass upon the validity of the issuance of the shares of our common stock offered by this prospectus. Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California, is acting as counsel to the underwriters in connection with certain legal matters relating to the shares of common stock offered by this prospectus.

EXPERTS

The consolidated financial statements of Adesto Technologies Corporation and its subsidiaries as of December 31, 2013 and 2014 and for each of the two years in the period ended December 31, 2014, included in this prospectus, have been so included in reliance on the report of Burr Pilger Mayer, Inc., an independent registered public accounting firm, given on the authority of such firm 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 our common stock. 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 to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed for a more complete understanding of that contract or document. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. A copy of the registration statement, including the exhibits filed as a part of the registration statement, may be inspected without charge at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from the SEC upon the payment of fees prescribed by it. You may call the SEC at 1-800-SEC-0330 for more information on the operation of the public reference facilities. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding companies that file electronically with it.

As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act, and, in accordance with this law, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC’s public reference facilities and the website of the SEC referred to above.

 

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

     Page  

Adesto Technologies Corporation

  

Report of Independent Registered Public Accounting Firm

     F-2   

Consolidated Balance Sheets

     F-3   

Consolidated Statements of Operations

     F-4   

Consolidated Statements of Comprehensive Loss

     F-5   

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

     F-6   

Consolidated Statements of Cash Flows

     F-7   

Notes to Consolidated Financial Statements

     F-8   

 

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Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Adesto Technologies Corporation

We have audited the accompanying consolidated balance sheets of Adesto Technologies Corporation and its subsidiaries (the “Company”) as of December 31, 2013 and 2014, and the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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. The Company is not required to have, nor were we 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Adesto Technologies Corporation and its subsidiaries as of December 31, 2013 and 2014, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America.

/s/ Burr Pilger Mayer, Inc.

San Jose, California

October 2, 2015

 

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ADESTO TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

    December 31,     June 30,
2015
    Pro Forma as of
June 30, 2015
 
    2013     2014      
                (unaudited)  

Assets

       

Current assets:

       

Cash and cash equivalents

  $ 11,580      $ 5,972      $ 6,470      $                            

Accounts receivable, net

    4,888        1,994        4,388     

Inventories

    10,375        7,453        5,579     

Prepaid expenses

    380        239        421     

Deferred tax asset, current

    —          291        291     

Other current assets

    1,568        1,095        1,810     
 

 

 

   

 

 

   

 

 

   

Total current assets

    28,791        17,044       

 

18,959

 

  

 

 

Property and equipment, net

    2,745        1,725        1,059     

Deferred tax asset, non-current

    —          1,861        1,861     

Intangible assets, net

    12,031        10,795        10,177     

Goodwill

    22        22        22     
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 43,589      $ 31,447      $

 

 32,078

 

  

 

  $                
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)

       

Current liabilities:

       

Revolving line of credit

  $ 6,000      $ 4,273     

 

 

 

$

 

 

 

—  

 

 

 

  

  $     

Accounts payable

    9,050        7,814       

 

8,322

 

  

 

 

Income taxes payable

    8        134       

 

195

 

  

 

 

Accrued compensation and benefits

    1,207        877        1,004     

Accrued expenses and other current liabilities

    1,280        1,334        1,223     

Deferred tax liability, current

    —          726        733     

Term loan

    2,594        6,476        3,998     
 

 

 

   

 

 

   

 

 

   

Total current liabilities

    20,139        21,634     

 

 

 

 

15,475

 

 

  

 

    —     

Preferred stock warrant liability

    262        122     

 

 

 

 

 

 

903

 

 

 

  

 

 

Term loan

    6,307        —       

 

 

 

 

 

 

 

 

 

10,135

 

 

 

 

  

 

Deferred tax liability, non-current

    13        1,453     

 

 

 

 

 

 

 

1,453

 

 

 

  

 

Other liabilities, non-current

    62        23     

 

 

 

 

 

8

 

 

  

 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    26,783        23,232       

 

 

27,974

 

 

  

 

 

    —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies (See Note 7)

       

Convertible preferred stock:

       

Convertible preferred stock, no par value, 4,653,586 shares authorized as of December 31, 2013 and 2014 and June 30, 2015 (unaudited); 4,419,853 shares issued and outstanding with aggregated liquidation preference of $128.4 million as of December 31, 2013 and 2014 and June 30, 2015 (unaudited); no shares issued and outstanding as of June 30, 2015 pro forma (unaudited)

    78,467        78,467     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78,467

 

 

 

 

 

 

 

 

 

  

 

    —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity (deficit):

       

Common stock, $0.0001 par value, 6,666,666 shares authorized as of December 31, 2013 and 2014 and 14,696,969 shares authorized as of June 30, 2015 (unaudited); 539,156, 559,554 and 564,141 shares issued and outstanding as of December 31, 2013 and 2014 and June 30, 2015 (unaudited), respectively; 9,678,880 shares issued and outstanding as of June 30, 2015 pro forma (unaudited)

    —          —         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    1   

Additional paid-in capital

    3,632        3,912     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,032

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

    83,401   

Accumulated other comprehensive loss

    (66     (3  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (191

Accumulated deficit

    (65,227     (74,161  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(78,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (78,204
 

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity (deficit)

    (61,661     (70,252     (74,363     5,007   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities, convertible preferred stock and stockholders’ equity
(deficit)

  $ 43,589      $ 31,447      $ 32,078     
 

 

 

   

 

 

   

 

 

   

See notes to consolidated financial statements.

 

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ADESTO TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

 

     Year Ended December 31,      Six Months Ended June 30,  
     2013     2014            2014                 2015        
                  (unaudited)  

Revenue

   $ 49,684      $ 41,465       $  21,062      $  20,290   

Cost of revenue

     29,738        25,532         13,034        12,236   
  

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     19,946        15,933         8,028        8,054   
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating expenses:

         

Research and development

     15,033        14,410         7,919        6,096   

Sales and marketing

     8,094        7,211         3,633        4,063   

General and administrative

     2,677        2,356         1,170        1,670   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expenses

     25,804        23,977         12,722        11,829   
  

 

 

   

 

 

    

 

 

   

 

 

 

Loss from operations

     (5,858     (8,044      (4,694     (3,775
  

 

 

   

 

 

    

 

 

   

 

 

 

Other income (expense):

         

Interest expense, net

     (2,731     (864      (422     (486

Other income (expense), net

     508        114         43        289   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total other income (expense), net

     (2,223     (750      (379     (197
  

 

 

   

 

 

    

 

 

   

 

 

 

Loss before provision for income taxes

     (8,081     (8,794      (5,073     (3,972

Provision for income taxes

     72        140         110        71   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (8,153   $ (8,934    $ (5,183   $ (4,043
  

 

 

   

 

 

    

 

 

   

 

 

 

Net loss per share attributable to common stockholders

         

Basic and diluted

   $ (15.14   $ (16.48    $ (9.61   $ (7.21
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted average number of shares used in computing net loss per share attributable to common stockholders

         

Basic and diluted

       538,388        542,245         539,228        560,694   
  

 

 

   

 

 

    

 

 

   

 

 

 

Pro forma net loss per share

         

Basic and diluted (See Note 1)

     $ (0.93      $ (0.42
    

 

 

      

 

 

 

Shares used in computing pro forma net loss per share

         

Basic and diluted (See Note 1)

       9,656,984           9,675,433   
    

 

 

      

 

 

 

 

 

See notes to consolidated financial statements.

 

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ADESTO TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

 

     Year Ended December 31,     Six Months Ended June 30,  
         2013             2014             2014             2015      
                 (unaudited)  

Net loss

   $ (8,153   $ (8,934   $ (5,183   $ (4,043

Other comprehensive income (loss), net of tax

        

Foreign currency translation adjustment

     (58     63        182        (188
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss, net of tax

   $ (8,211   $ (8,871   $ (5,001   $ (4,231
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See notes to consolidated financial statements.

 

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Index to Financial Statements

ADESTO TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(in thousands, except share data)

 

                Stockholders’ Deficit  
   

 

Convertible Preferred Stock

   

 

Common Stock

    Additional
Paid-In
Capital
    Accumulated
Other
Comprehensive

Loss
    Accumulated
Deficit
    Total
Stockholders’

Deficit
 
        Shares             Amount          Shares     Amount          

Balances as of December 31, 2012

    3,648,741      $ 60,366       536,763      $ —       $ 3,462     $ (8 )   $ (57,074 )   $ (53,620

Issuance of convertible preferred stock, net of exchange of liability due to investors

    771,112        18,101       —          —          —          —          —          —     

Options exercised

    —          —          2,393        —          6        —          —          6   

Stock-based compensation

    —          —          —          —          164        —          —          164   

Foreign currency translation adjustments

    —          —          —          —          —          (58     —          (58

Net loss

    —          —          —          —          —          —          (8,153     (8,153
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2013

    4,419,853        78,467       539,156        —         3,632       (66 )     (65,227 )     (61,661

Options exercised

    —          —          20,398        —          34        —          —          34   

Stock-based compensation

    —          —          —          —          246        —          —          246   

Foreign currency translation adjustments

    —          —          —          —          —          63        —          63   

Net loss

    —          —          —          —          —          —          (8,934     (8,934
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2014

   
4,419,853
  
    78,467       559,554        —         3,912       (3 )     (74,161 )     (70,252

Options exercised (unaudited)

    —          —          4,587        —          8        —          —          8   

Stock-based compensation (unaudited)

    —          —          —          —          112        —          —          112   

Foreign currency translation adjustments (unaudited)

    —          —          —          —          —          (188     —          (188

Net loss (unaudited)

    —          —          —          —          —          —          (4,043     (4,043
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of June 30, 2015 (unaudited)

    4,419,853      $ 78,467        564,141      $   —        $ 4,032      $ (191   $ (78,204   $ (74,363
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See notes to consolidated financial statements.

 

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ADESTO TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

    Year Ended December 31, 2014     Six Months Ended June 30,  
            2013                     2014                     2014                     2015          
                (unaudited)  

Cash flows from operating activities:

       

Net loss

  $ (8,153   $ (8,934   $ (5,183   $ (4,043

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

       

Stock-based compensation expense

    164        246        77        112   

Depreciation and amortization

    1,071        1,780        873        827   

Amortization of intangible assets

    3,320        1,236        618        618   

Amortization of debt discount

    1,071        115        17        217   

Deferred income taxes

    13        14        —          7   

Changes in fair value of preferred stock warrant liability

    (1,200     (206     (28     (81

Changes in assets and liabilities:

       

Accounts receivable

    3,161        2,894        2,378        (2,393

Inventory

    (5,199     2,922        229        1,874   

Prepaid and other current assets

    (170     760        384        (977

Accounts payable

    6,512        (1,236     (271     508   

Accrued compensation and benefits

    715        (330     (50     126   

Accrued expenses and other liabilities

    (1,994     159        772        (67
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in operating activities

    (689     (580     (184     (3,272
 

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities

       

Acquisition of property and equipment

    (2,239     (760     (596     (107

Change in restricted cash

    4,000        —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

    1,761        (760     (596     (107
 

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities

       

Proceeds from issuance of common stock

    6        34        1        8   

Proceeds from issuance of convertible preferred stock

    12,365        —          —          —     

Proceeds from convertible notes payable

    5,000        —          —          —     

Proceeds from term loan

    8,910        —          —          14,903   

Proceeds from revolving line of credit

    5,980        2,660        2,030        —     

Payments on revolving line of credit

    —          (4,462     (3,762     (4,273

Payments on term loan

    (21,730     (2,461     (600     (6,600
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

    10,531        (4,229     (2,331     4,038   
 

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

    (23     (39     184        (161
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

    11,580        (5,608     (2,927     498   

Cash and cash equivalents-beginning of year

    —          11,580        11,580        5,972   
 

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents-end of year

  $ 11,580      $ 5,972      $ 8,653      $ 6,470   
 

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental disclosures of other cash flow information:

   

Cash paid for interest expense

  $ 1,983      $ 760      $ 422      $ 318   

Noncash investing and financing activities:

   

Conversion of convertible notes payable to Series D-1 convertible preferred stock, including interest

  $ 5,236      $ —        $ —        $ —     

Release of liability in conjunction with exercise of preferred stock warrant

  $ 500      $ —        $
—  
  
  $ —     

Acquisition of property and equipment under capital leases

  $ 113      $ —        $ —        $ —     

Issuance of preferred stock warrants in connection with term loan

  $ 619      $ 66      $ —        $ 863   

See notes to consolidated financial statements.

 

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ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Summary of Significant Accounting Policies

Organization and Nature of Operations.

Adesto Technologies Corporation (together with its subsidiaries; “we”, “our” or “us”) was incorporated in the state of California in January 2006. In connection with our planned initial public offering, we plan to reincorporate in the state of Delaware. We are a leading provider of application-specific, feature-rich, ultra-low power non-volatile memory (“NVM”) products. Our corporate headquarters are located in Sunnyvale, California.

On September 28, 2012, we purchased certain flash memory product assets from Atmel Corporation and our financial results include the operating results of those assets from the date of acquisition.

Basis of Presentation.

The consolidated financial statements include the results of our operations, and the operations of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Reverse Stock Split.

On October 1, 2015, we effected a 1-for-33 reverse stock split of our common stock and convertible preferred stock (collectively, “Capital Stock”). On the effective date of the reverse stock split, (i) each 33 shares of outstanding Capital Stock were reduced to one share of Capital Stock; (ii) the number of shares of Capital Stock into which each outstanding warrant or option to purchase Capital Stock is exercisable were proportionately reduced on a 33-to-1 basis; (iii) the exercise price of each outstanding warrant or option to purchase Capital Stock were proportionately increased on a 1-to-33 basis; and (iv) each 33 shares of authorized Capital Stock were reduced to one share of Capital Stock. All of the share numbers, share prices, and exercise prices have been adjusted, on a retroactive basis, to reflect this 1-for-33 reverse stock split. The par value of the common stock and convertible preferred stock were not adjusted as a result of the reverse stock split.

Use of Estimates.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate those estimates, including those related to allowances for doubtful accounts, reserves for sales, warranty accrual, inventory write-downs, valuation of long-lived assets, including property and equipment and identifiable intangible assets and goodwill, loss on purchase commitments, valuation of deferred taxes and contingencies. In addition, we use assumptions when employing the Black-Scholes option-pricing model to calculate the fair value of stock options granted and to estimate the carrying value of our convertible preferred stock warrant liability. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results could differ from these estimates.

Revenue Recognition and Accounts Receivable Allowances.

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, transfer of title occurs, and the collectibility of the resulting receivable is reasonably assured. Due to the historical immaterial level of product returns under warranty, we do not record a reserve for estimated returns under warranty.

 

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Index to Financial Statements

Generally, we meet these conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, we estimate and record provisions for future returns and other charges against revenue at the time of shipment, consistent with the terms of sale. We sell products to distributors at the price listed in our distributor price book. At the time of sale, we record a sales reserve for ship from stock and debits (“SSDs”), stock rotation rights and any special programs approved by management. We offset the sales reserve against revenues, producing the revenue amount reported in the consolidated statements of operations.

The market price for our products can be significantly different from the book price at which we sold the product to the distributor. When the market price, as compared to our original book price, of a particular distributor’s sales opportunity to their customers would result in low or negative margins for the distributor, we negotiate SSDs with the distributor. Management analyzes our SSD history to develop current SSD rates that form the basis of the SSD revenue reserve recorded each period. We obtain the historical SSD rates from the distributor’s records and our internal records.

We typically grant payment terms of between 30 and 60 days to our customers. Our customers generally pay within those terms. Distributors are invoiced for shipments at listed book price. When the distributors pay the invoice, they may claim debits for SSDs previously authorized by us when appropriate. Once claimed, we process the requests against prior authorizations and adjust reserves previously established for that customer.

The revenue we record for sales to our distributors is net of estimated provisions for these programs. When determining this net revenue, we must make significant judgments and estimates. We base our estimates on historical experience rates, the levels of inventory held by our distributors, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and our estimates. Our consolidated financial condition and operating results depend on our ability to make reliable estimates and we believe that such estimates are reasonable.

In addition, we monitor collectibility of accounts receivable primarily through review of our accounts receivable aging. When facts and circumstances indicate the collection of specific amounts or from specific customers is at risk, we assess the impact on amounts recorded for bad debts and, if necessary, record a charge in the period such determination is made. As of December 31, 2013 and 2014, there was no allowance for doubtful accounts.

Shipping Costs.

We charge shipping costs to cost of revenue as incurred.

Product Warranty.

Our products are sold with a limited warranty for a period of one year, warranting that the product conforms to specifications and is free from material defects in design, materials and workmanship. To date, we have had insignificant returns of any defective production parts. As such, there is no accrual for warranty included in the consolidated financial statements for the periods presented.

Income Taxes.

We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements, but have not been reflected in our taxable income. Valuation allowances are established to reduce deferred tax assets as necessary when in management’s estimate, based on available objective evidence, it is more likely than not that we will not generate sufficient taxable income in future periods to realize the benefit of our deferred tax assets. We include interest and penalties related to unrecognized tax benefits in income tax expense. We recognize in our consolidated financial statements the impact of a tax position that based on its technical merits is more likely than not to be sustained upon examination.

 

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Index to Financial Statements

Foreign Currency Translation.

The functional currency of our foreign subsidiaries is the local currency. In consolidation, we translate assets and liabilities at exchange rates in effect at the consolidated balance sheet date. We translate revenue and expense accounts at the average exchange rates during the period in which the transaction takes place. Net gains or losses from foreign currency translation of assets and liabilities were a loss of $0.1 million, a gain of $0.1 million, a gain of $0.2 million and a loss of $0.2 million for the years ended December 31, 2013 and 2014 and the six months ended June 30, 2014 and 2015, respectively, and are included in the cumulative translation adjustment component of accumulated other comprehensive income, net of tax, a component of stockholders’ equity (deficit). Net gains and losses arising from transactions denominated in currencies other than the functional currency were a $0.1 million gain, a $0.1 million loss, a $15,000 gain and a $0.1 million loss for the years ended December 31, 2013 and 2014 and the six months ended June 30, 2014 and 2015, respectively, and are included in other income (expense), net.

Unaudited Pro Forma Stockholders’ Equity (Deficit).

All of our outstanding shares of convertible preferred stock (“preferred stock”) will automatically convert into shares of common stock upon the completion of an initial public offering with gross proceeds to us of not less than $30 million. We expect this offering to generate proceeds to us of at least $30 million and have assumed that all 4,419,853 shares of preferred stock would convert into 9,114,739 shares of common stock based on the shares of preferred stock outstanding as of June 30, 2015. In addition, the preferred stock warrants would convert into common stock warrants and the preferred stock warrant liability would be reclassified to additional paid-in capital in stockholders’ equity (deficit). The unaudited pro forma stockholders’ equity (deficit) as of June 30, 2015 gives effect to the automatic conversion of all outstanding shares of our preferred stock into shares of common stock and the reclassification of the preferred stock warrant liability to additional paid-in capital in stockholders’ equity (deficit).

Unaudited Interim Financial Information.

The accompanying interim consolidated balance sheet as of June 30, 2015, the interim consolidated statements of operations, comprehensive loss and cash flows for the six month periods ended June 30, 2014 and 2015, the consolidated statement of convertible preferred stock and stockholders’ deficit for the six month period ended June 30, 2015, and the related footnote disclosures are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with US GAAP applicable to interim financial statements. The interim financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with US GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position as of June 30, 2015 and our consolidated results of operations and cash flows for the six months ended June 30, 2014 and 2015. The results for the six months ended June 30, 2015 are not necessarily indicative of the results expected for the year ending December 31, 2015.

Cash and Cash Equivalents.

We consider all highly liquid investments with an initial maturity of 90 days or less at the date of purchase to be cash equivalents. We maintain such funds in overnight cash deposits.

Deferred Initial Public Offering Costs.

Deferred initial public offering costs, consisting of direct and incremental legal, accounting and other fees and costs attributable to our registration statement, are capitalized. The deferred offering costs will be offset against

 

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Index to Financial Statements

the proceeds received upon the closing of the offering. In the event the offering does not occur in a timely manner, all of the deferred offering costs will be expensed within operations. The balance of other assets in the accompanying consolidated balance sheets as of June 30, 2015 included $0.8 million of such costs. There were no deferred offering costs capitalized as of December 31, 2013 and 2014.

Property and Equipment.

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the related lease, whichever is shorter. Estimates of useful lives are as follows:

 

    Estimated useful lives

Machinery and equipment

  2-5 years

Furniture and fixtures

  3 years

Leasehold improvements

  Shorter of lease term or 5 years

Computer software

  3 years

Inventories.

We record inventories at the lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value. On a quarterly basis, we analyze inventories on a part-by-part basis. The carrying value of inventory is adjusted for excess and obsolete inventory based on inventory age, shipment history and the forecast of demand over a specific future period. At the point of loss recognition, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that new cost basis. The semiconductor markets that we serve are volatile and actual results may vary from forecast or other assumptions, potentially affecting our assessment of excess and obsolete inventory which could have a material effect on our results of operations.

Long-Lived Assets.

We evaluate our long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. We recognize an impairment loss when the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to the asset. If impairment is indicated, we write the asset down to its estimated fair value. For all periods presented, we have not recognized any impairment losses on our long-lived assets.

Purchased Intangible Assets.

Purchased intangible assets are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets with definite lives are carried at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets as follows:

 

     Years  

Developed technology

     10   

Customer relationships

     12   

Customer backlog

     1   

Non-compete agreement

     5   

Goodwill.

Goodwill represents the excess of the cost of an acquisition over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed.

 

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We evaluate our goodwill, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We perform our annual goodwill impairment test as of December 31 of each year.

When evaluating goodwill for impairment, we may initially perform a qualitative assessment which includes a review and analysis of certain quantitative factors to estimate if a reporting units’ fair value significantly exceeds its carrying value. When the estimate of a reporting unit’s fair value appears more likely than not to be less than its carrying value based on this qualitative assessment, we continue to the first step of a two step impairment test. The first step requires a comparison of the fair value of the reporting unit to its net book value, including goodwill. The fair value of the reporting units is determined based on a weighting of income and market approaches. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, we estimate the fair value based on market multiples of revenue or earnings for comparable companies. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and market conditions and determination of appropriate market comparables. We base these fair value estimates on reasonable assumptions but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. A potential impairment exists if the fair value of the reporting unit is lower than its net book value. The second step of the process is only performed if a potential impairment exists, and it involves determining the difference between the fair values of the reporting unit’s net assets, other than goodwill, and the fair value of the reporting unit, and, if the difference is less than the net book value of goodwill, an impairment charge is recorded. In the event that we determine that the value of goodwill has become impaired, we record a charge for the amount of impairment during the fiscal quarter in which the determination is made. We operate in one reporting unit. We conducted our annual goodwill impairment analysis in the fourth quarter of 2014 and no goodwill impairment was indicated.

Research and Development Expenses.

Research and development expenditures are expensed as incurred.

Stock-based Compensation.

We account for stock-based compensation using the fair value method. We determine fair value for stock options awarded to employees at the grant date using the Black-Scholes option pricing model, which requires us to make various assumptions, including the fair value of the underlying common stock, expected future share price volatility and expected term. We determine the fair value of stock options awarded to non-employees at each vesting date using the Black-Scholes option pricing model, and re-measure fair value at each reporting period until the services required under the arrangement are completed. Fair value is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. We are required to estimate the expected forfeiture rate and only recognize expense for those stock-based awards expected to vest. We estimate the forfeiture rate based on historical experience of our stock-based awards that are granted, exercised and cancelled. If the actual forfeiture rate is materially different from our estimate, stock-based compensation expense in future periods could be significantly different from what was recorded in the current period.

Preferred Stock Warrant Liability.

We account for outstanding warrants to purchase preferred stock that are contingently redeemable as liabilities on the consolidated balance sheets at their estimated fair value because the warrants are contingently redeemable and, therefore, may obligate us to transfer assets at some point in the future. The preferred stock warrants are recorded at fair value upon issuance and are subject to re-measurement to fair value at each reporting date, with any change in fair value recognized in the consolidated statements of operations as a component of other income

 

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Index to Financial Statements

(expense), net. We determine fair value of the preferred stock warrants using the Black-Scholes option pricing model, which requires us to make various assumptions, including expected future share price volatility and expected term. The preferred stock warrant liability will be re-measured to its fair value at each reporting date until the earlier of the (i) exercise of the warrants, (ii) expiration of the warrants, or (iii) other triggering events as applicable to the terms of the warrant agreements, including the completion of an initial public offering, at which time the preferred stock issuable upon exercise of the warrants will become common stock and the related liability will be reclassified to additional paid-in capital in stockholders’ equity (deficit).

Concentration of Risk.

Our products are primarily manufactured, assembled and tested by third-party foundries and other contractors in Asia and we are heavily dependent on a single foundry in Taiwan for the manufacture of wafers and a single contractor in the Philippines for assembly and testing of our products. We do not have long-term agreements with either of these suppliers. A significant disruption in the operations of either of these parties would adversely impact the production of our products for a substantial period of time, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivables. We place substantially all of our cash and cash equivalents on deposit with a reputable, high credit quality financial institution in the United States of America. We believe that the bank that holds substantially all of our cash and cash equivalents is financially sound and, accordingly, subject to minimal credit risk. Deposits held with the bank may exceed the amount of insurance provided on such deposits.

We generally do not require collateral or other security in support of accounts receivable. We periodically review the need for an allowance for doubtful accounts by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. As a result of our favorable collection experience and customer concentration, there was no allowance for doubtful accounts as of December 31, 2013 and 2014 and June 30, 2015.

Customer concentrations as a percentage of total revenue were as follows:

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2013     2014     2014     2015  
                 (unaudited)  

Customer A

     25     20     22     15

Customer B

     *        20     *        *   

Customer C

     12     14     18     *   

Customer D

     *        *        11     *   

 

* less than 10%

Customer concentrations as a percentage of gross accounts receivable were as follows:

 

     December 31,     June 30,
2015
 
      2013       2014     
                

(unaudited)

 

Customer A

     26     20     14

Customer B

     13     15     15

Customer C

     13     10     *   

Customer D

     *        *        *   

Customer E

     *        *        11

 

* less than 10%

 

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Index to Financial Statements

Net Income (Loss) per Share.

Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Net income (loss) attributable to common stockholders is determined by allocating undistributed earnings between holders of common and preferred stock, based on the contractual dividend rights of the holders of preferred stock including those dividends payable on preferred stock prior and in preference to the holders of common stock. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders for purposes of calculating diluted net income (loss) per share by the weighted average number of common shares and potentially dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net income (loss) per share calculation, convertible preferred stock, common stock options, and warrants are considered to be potentially dilutive securities.

Loss Contingencies.

We are or have been subject to claims arising in the ordinary course of business. We evaluate contingent liabilities, including threatened or pending litigation, for potential losses. If the potential loss from any claim or legal proceedings is considered probable and the amount can be estimated, we accrue a liability for the estimated loss. Because of uncertainties related to these matters, accruals are based upon the best information available. For potential losses for which there is a reasonable possibility (meaning the likelihood is more than remote but less than probable) that a loss exists, we will disclose an estimate of the potential loss or range of such potential loss or include a statement that an estimate of the potential loss cannot be made. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise our estimates, which could materially impact our consolidated financial statements.

Unaudited Pro Forma Net Loss per Share of Common Stock.

In contemplation of our initial public offering, we have presented the unaudited pro forma basic and diluted net loss per share of common stock, which has been computed to give effect to the automatic conversion of all series of our preferred stock into shares of common stock. Also, the numerator in the pro forma basic and diluted net loss per common share calculation has been adjusted to remove the loss resulting from the remeasurement of the fair value of the preferred stock warrant liability to fair value as if the conversion had occurred as of the beginning of the period.

Recent Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 regarding ASC Topic 606— Revenue from Contracts with Customers . The standard provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for us in the first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within the guidance; or (ii) retrospective with the cumulative effect of initially applying the guidance recognized at the date of initial application and providing certain additional disclosures as defined per the guidance. Early adoption is not permitted. We are currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

In August 2014, the FASB issued ASU 2014-15,  Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in the timing and content of footnote disclosures than under today’s guidance. ASU 2014-15 is effective for us in the first quarter of 2016 with early adoption permitted. We do not believe the impact of adopting ASU 2014-15 will be material to our consolidated financial statements and disclosure.

 

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Note 2. Balance Sheet Components.

Accounts Receivable, Net.

Accounts receivable, net consisted of the following (in thousands):

 

     December 31,      June 30,  
     2013      2014      2015  
                   (unaudited)  

Accounts receivable

   $ 11,874       $ 6,079       $ 8,962   

Allowance for SSDs

     (6,986      (4,085      (4,574
  

 

 

    

 

 

    

 

 

 

Total accounts receivable, net

   $ 4,888       $ 1,994       $ 4,388   
  

 

 

    

 

 

    

 

 

 

Inventories.

Inventories consisted of the following (in thousands):

 

     December 31,      June 30,  
     2013      2014      2015  
                   (unaudited)  

Raw materials

   $ 2,939       $ 728       $ 1,145   

Work-in-process

     5,673         4,707         3,145   

Finished goods

     1,763         2,018         1,289   
  

 

 

    

 

 

    

 

 

 

Total inventories

   $ 10,375       $ 7,453       $ 5,579   
  

 

 

    

 

 

    

 

 

 

For the years ended December 31, 2013 and 2014 and six months ended June 30, 2014 we recorded inventory write-downs of $4.2 million, $3.6 million, and $2.7 million, respectively. Inventory charges we recorded were primarily associated with products built in excess of customer demand which resulted in excess inventory levels, legacy products for which no demand exists and lower of cost or market write-downs associated with CBRAM products for which costs exceeded market value. For the six months ended June 30, 2015, we realized a benefit of $0.7 million from sales of inventory previously written down.

Other Current Assets.

Other current assets consisted of the following (in thousands):

 

     December 31,      June 30,  
     2013      2014      2015  
                   (unaudited)  

Foreign research credit receivable

   $ 1,412       $ 947       $ 865   

Deferred initial public offering costs

     —           —           792   

Other current assets

     156         148         153   
  

 

 

    

 

 

    

 

 

 

Total other current assets

   $ 1,568       $ 1,095       $ 1,810   
  

 

 

    

 

 

    

 

 

 

 

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Property and Equipment, Net.

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

 

     December 31,      June 30,  
     2013      2014      2015  
                   (unaudited)  

Machinery and equipment

   $ 5,381       $ 6,114       $ 6,226   

Furniture and fixtures

     73         77         77   

Leasehold improvements

     123         146         141   

Computer software

     668         668         668   
  

 

 

    

 

 

    

 

 

 

Property and equipment, at cost

     6,245         7,005         7,112   

Accumulated depreciation and amortization

     (3,500      (5,280      (6,053
  

 

 

    

 

 

    

 

 

 

Property and equipment, net

   $ 2,745       $ 1,725       $ 1,059   
  

 

 

    

 

 

    

 

 

 

Depreciation and amortization expense of property and equipment for the years ended December 31, 2013 and 2014 and six months ended June 30, 2014 and 2015 was $1.1 million, $1.8 million, $0.9 million and $0.8 million, respectively.

Accrued Expenses and Other Current Liabilities.

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

     December 31,      June 30,  
     2013      2014      2015  
                   (unaudited)  

Accrual for losses on wafer purchase commitments

   $ 561       $ 583       $ 307   

Accrued sales commissions payable

     234         315         588   

Other accrued liabilities

     485         436         328   
  

 

 

    

 

 

    

 

 

 

Total accrued expenses and other current liabilities

   $ 1,280       $ 1,334       $ 1,223   
  

 

 

    

 

 

    

 

 

 

Note 3. Fair Value Measurements.

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1 . Quoted prices in active markets for identical assets or liabilities.

Level 2 . Quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3 . Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities.

 

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Financial liabilities measured at fair value on a recurring basis were as follows:

 

     Fair Value Measurement as of Reporting Date Using  
     Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
     Total  
     (in thousands)  

As of December 31, 2013

  

Liabilities:

           

Preferred stock warrant liability

   $ —         $ —         $ 262       $ 262   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2014

           

Liabilities:

           

Preferred stock warrant liability

   $ —         $ —         $ 122       $ 122   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2015 (unaudited)

           

Liabilities:

           

Preferred stock warrant liability

   $ —         $ —         $ 903       $ 903   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2013 and 2014, we used the Black-Scholes option pricing model to determine the fair value of the warrants to purchase preferred stock, including the consideration of underlying common stock price, a risk-free interest rate, expected term and expected volatility. Certain inputs used in the model are unobservable. The fair values could change significantly based on future market conditions. The following table presents quantitative information about the inputs used for our fair value measurements classified in Level 3 of the fair value hierarchy as of December 31, 2013 and 2014:

 

     Year Ended December 31,  
         2013             2014      
              

Volatility

     65     40 %

Expected dividend yield

     —          —     

Risk-free rate

     1.25     1.74 %

Expected term (in years)

     6        6   

As of June 30, 2015, we valued our preferred stock warrants using the probability-weighted expected return method (“PWERM”) whereby the value of the various classes of securities are estimated based upon the analysis of future values for us assuming various possible future liquidity events such as an initial public offering (“IPO”), sale or merger. Share value is based upon the probability-weighted present value of expected future net cash flows, considering each of the possible future events, as well as the rights and preferences of each share class. The PWERM was selected due to our established nature, the prospect of a near term exit via an IPO or sale, and our ability to reasonably forecast financial performance.

First, we considered the most likely future liquidity event scenarios to be used in the PWERM analysis. Those scenarios were selected to be (i) an IPO completed on September 30, 2015, (ii) an IPO completed on March 31, 2016, (iii) a sale completed on December 31, 2015, (iv) a sale completed on March 31, 2016, and (v) an orderly liquidation completed on December 31, 2016. The probability applied to each scenario was estimated by the board of directors to be 35%, 20%, 15%, 15%, and 15%, respectively.

Second, our future total equity values for the IPO scenarios were estimated using our prospective cash flows and the application of a next-twelve-month (“NTM”) revenue multiple of 1.8x and 1.9x based on a review of selected similar guideline public companies. Our future total equity values for the sale scenarios were estimated using our prospective cash flows and the application of a last-twelve-month (“LTM”) revenue multiple of 2.3x and 2.5x

 

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based on a review of selected similar M&A transactions. Our future total equity value for the orderly liquidation scenario was based upon an asset approach, where the value of our assets and liabilities were adjusted based on estimated salvage values in an orderly liquidation. For each scenario, the values of cash and debt were adjusted to expected balances as of the liquidity date for each scenario.

Third, the future total equity value for each scenario was bifurcated to each class of security based upon their respective rights and preferences. Security classes included convertible preferred stock (by seniority), outstanding warrants to purchase convertible preferred stock, common stock, and outstanding options to purchase common stock. Under the IPO scenarios, the convertible preferred stock was assumed to automatically convert to common stock without receiving a liquidation preference. Under the sale scenarios, the convertible preferred stock was assumed to receive its respective liquidation preferences and then participate with the common stock on a pro rata basis on any remaining distributions with no cap on participation. The total distributions to common stock were aggregated under each scenario and divided by the total shares of common stock outstanding to determine the share value for the common stock at the subject liquidity date.

Fourth, the concluded share values for the common stock for each scenario were then discounted to present value using a reasonable rate of return applicable to our prospective risks. The concluded discount rate of 25.1% was based on an application of the weighted average cost of capital (“WACC”) using the capital asset pricing method (“CAPM”).

Lastly, we estimated the discount for lack of marketability (“DLOM”) to be applied to the shares of common stock. The DLOM reflects the lower value placed on securities that are not freely transferable, as compared to those that trade frequently in established markets. The DLOMs were estimated using the protective put method and ranged between 0% to 12.5%, depending on the scenario.

In addition, in order to estimate warrant liabilities, preferred stock warrants were also valued using the above methodologies and assumptions. It should be noted that, prior to IPO or sale, no future financing rounds are expected.

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, the valuation of our equity-based compensation could be materially different. The key subjective factors and assumptions used in our valuation of as of June 30, 2015 primarily consisted of:

 

    the probability and timing of the various possible liquidity scenarios;

 

    the estimate of prospective cash flows leading up to each liquidity scenario;

 

    the selection of LTM and NTM revenue multiples based on a review of selected similar guideline public company and M&A transaction data;

 

    the estimated rate of return using the WACC; and

 

    the estimated DLOM.

 

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The following table sets forth a reconciliation the changes in fair value of preferred stock warrants (in thousands):

 

Balance as of December 31, 2012

   $ 843   

Issuance of preferred stock warrants

     619   

Change in fair value of preferred stock warrants

     (1,200
  

 

 

 

Balance as of December 31, 2013

     262   

Issuance of preferred stock warrants

     66   

Change in fair value of preferred stock warrants

     (206
  

 

 

 

Balance as of December 31, 2014

     122   

Issuance of preferred stock warrants (unaudited)

     862   

Change in fair value of preferred stock warrants (unaudited)

     (81
  

 

 

 

Balance as of June 30, 2015 (unaudited)

   $ 903   
  

 

 

 

As of December 31, 2013 and 2014 and June 30, 2015, we did not have any assets that are measured at fair value on a recurring basis.

Note 4. Purchased Intangible Assets.

In 2012, in connection with our purchase of the serial flash memory product line assets from Atmel Corporation, we recorded $16.4 million of intangible assets (see Note 13).

Intangible assets were as follows (in thousands):

 

          December 31, 2013  
     Estimated Useful
Life (in Years)
   Gross Carrying
Amount
     Accumulated
Amortization
     Net Carrying
Amount
 

Developed technology

   10    $ 4,282       $ 535       $ 3,747   

Customer relationships

   12      9,011         938         8,073   

Customer backlog

   1      2,779         2,779         —     

Non-compete agreement

   5      282         71         211   
     

 

 

    

 

 

    

 

 

 

Total intangible assets subject to amortization

      $ 16,354       $ 4,323       $ 12,031   
     

 

 

    

 

 

    

 

 

 

 

     December 31, 2014  
     Gross Carrying
Amount
     Accumulated
Amortization
     Net Carrying
Amount
 

Developed technology

   $ 4,282       $ 964       $ 3,318   

Customer relationships

     9,011         1,689         7,322   

Customer backlog

     2,779         2,779         —     

Non-compete agreement

     282         127         155   
  

 

 

    

 

 

    

 

 

 

Total intangible assets subject to amortization

   $ 16,354       $ 5,559       $ 10,795   
  

 

 

    

 

 

    

 

 

 
     June 30, 2015  
     Gross Carrying
Amount
     Accumulated
Amortization
     Net Carrying
Amount
 
     (unaudited)  

Developed technology

   $ 4,282       $ 1,178       $ 3,104   

Customer relationships

     9,011         2,065         6,946   

Customer backlog

     2,779         2,779         —     

Non-compete agreement

     282         155         127   
  

 

 

    

 

 

    

 

 

 

Total intangible assets subject to amortization

   $ 16,354       $ 6,177       $ 10,177   
  

 

 

    

 

 

    

 

 

 

 

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We recorded amortization expense related to the acquisition-related intangible assets as follows (in thousands):

 

     Year ended December 31,      Six Months Ended June 30,  
         2013              2014              2014              2015      
                   (unaudited)  

Operating expense category:

           

Research and development

   $ 429       $ 429       $ 242       $ 242   

Sales and marketing

     2,891         807         376         376   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,320       $ 1,236       $ 618       $ 618   
  

 

 

    

 

 

    

 

 

    

 

 

 

The annual expected amortization expense of acquisition-related intangible assets subject to amortization as of December 31, 2014 is as follows (in thousands):

 

Year Ended December 31,

      

2015

   $ 1,236   

2016

     1,236   

2017

     1,221   

2018

     1,179   

2019

     1,179   

Thereafter

     4,744   
  

 

 

 

Total

   $ 10,795   
  

 

 

 

Note 5. Borrowings.

Bridge Bank Loan.

In October 2013, we entered into the Business Financing Agreement (the “BFA”) with Bridge Bank N.A. The agreement consists of both a revolving credit facility under which we may borrow up to 80% of eligible accounts receivable but not to exceed $7.5 million and a term loan in the amount of $9.0 million. Interest on the revolving credit facility accrues at the bank’s prime rate, which under the BFA shall not be less than 3.25%, plus 1.25% while interest on the term loan accrues at the bank’s prime rate plus 3%. Under the term loan, we are required to make interest only payments through April 2014 and principal payments of $300,000 monthly thereafter plus interest. Borrowings under the BFA are secured by all of our assets and are subject to certain financial covenants, including maintaining minimum levels of EBITDA on a quarterly basis and a certain minimum asset coverage ratio based on the ratio of unrestricted cash plus certain accounts receivable to total outstanding under the agreement.

In 2014, we were not in compliance with certain financial covenants. As a result, in October 2014, we entered into the First Business Financing Modification Agreement (the “BFA Modification”) under which the covenant defaults were waived. The BFA Modification (i) increases the interest rate charged on the term loan from the bank’s prime rate plus 3% to the bank’s prime rate plus 4% declining to the bank’s prime rate plus 3% upon the raising of additional equity of not less than $2.5 million, (ii) requires us to continue to maintain certain minimum levels of EBITDA and asset coverage ratios, (iii) requires us to maintain unrestricted cash of not less than $4.25 million until that point at which we either receive additional equity of not less than $5.0 million or maintain a debt service coverage ratio of not less than 1.00 to 1.00 (based on the ratio of EBITDA to current portion of total amounts outstanding under the BFA Modification plus period-to-date interest expense payments) for two consecutive quarters.

In addition, under the BFA the bank was paid a facility fee of $82,500 at closing. Under the BFA Modification, the bank was paid an additional facility fee of $50,000 and received a warrant to purchase 1,488 shares of our Series E convertible preferred stock. The facility fees and the value of the warrant, $0.1 million, were recorded as debt discount and are being amortized over the life of the agreement. Amortization of debt discount was

 

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Index to Financial Statements

immaterial during 2013 and $0.1 million in 2014. As of December 31, 2014, the remaining unamortized debt discount was $0.1 million.

As of December 31, 2014 we were not in compliance with the financial covenants of the agreements and all amounts due under the agreement are shown as current on the consolidated balance sheets. Borrowings of $10.9 million under this facility were repaid in full in April 2015 (see Note 15).

Opus Bank Term Loan.

In September 2012, we entered into a Credit Agreement with Opus Bank for a $22.5 million term loan maturing September 2015. The loan was secured by all of our assets. We used $22.2 million in net proceeds from the loan to purchase the serial flash memory business assets from Atmel Corporation in 2012 (see Note 13), which we repaid in full in October 2013. Interest on the loan was payable monthly at a rate equal to the greater of (i) the Wall Street Journal Prime Rate plus a 4.50% margin, or (ii) 7.75% and monthly principal payments of $625,000 beginning November 1, 2012 and continuing on a monthly basis until the loan was paid in full. The Credit Agreement included a commitment fee of $225,000 that was due upon closing, and we also issued Opus Bank a warrant to purchase 35,885 shares of Series D preferred stock at a price per share of $31.35 (see Note 8). The Credit Agreement was amended in November 2012, and in connection therewith, on each of March 31, 2013 and June 30, 2013, we issued to Opus Bank a warrant to purchase 17,942 shares of Series D preferred stock at a price per share of $31.35 (see Note 8).

In April 2015, we entered into a three-year $15.0 million credit agreement, or the new term loan facility, which replaced our prior senior secured revolving credit and term loan facility. The agreement provides for a senior secured term loan facility, in an aggregate principal amount of up to $15.0 million to be used for general corporate purposes including working capital, to repay certain indebtedness and for capital expenditures and other expenses. Interest will accrue on any outstanding borrowings at a rate equal to (a) the higher of (i) the prime rate (as publicly announced from time to time by the Wall Street Journal) and (ii) 3.25% plus (b) (i) 1.00% if our cash and cash equivalents are greater than 125% of the outstanding principal of our borrowings under the new term loan facility, or (ii) 2.00% if our cash and cash equivalents are less than or equal to 125% of such borrowings. Indebtedness we incur under this agreement is secured by substantially all of our assets and contains financial covenants requiring us to maintain a monthly asset coverage ratio of not less than 1.00 to 1.00 through September 30, 2015 and 1.10 to 1.00 thereafter, and quarterly adjusted EBITDA (measured on a trailing three-month basis) of $1 through March 31, 2016 and increasing to higher levels thereafter. These financial covenants are substantially similar to the ones in our prior credit facility. The agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, merge or consolidate and make acquisitions. Upon an occurrence of an event of default, we could be required to pay interest on all outstanding obligations under the agreement at a rate of five percent above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement. As of June 30, 2015, we were in compliance with all financial covenants and restrictions and had borrowings of $15.0 million outstanding. We may not draw additional funds under the new term loan facility and our borrowings mature on April 30, 2018.

In connection with the new term loan facility, Opus Bank received a warrant to purchase 31,897 shares of Series E convertible preferred stock. In addition, we paid financing costs of $0.1 million. The financing costs and the value of the warrant, $0.9 million, were recorded as debt discount and are being amortized over the life of the agreement. Amortization of debt discount was $0.1 million during the six months ended June 30, 2015. As of June 30, 2015, the remaining unamortized debt discount was $0.9 million.

 

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Note Purchase Agreement.

In January and February of 2013 we issued a total of $5.0 million of subordinated convertible promissory notes. We used the proceeds for repayment of certain indebtedness, working capital and general corporate purposes. Interest accrued on the notes at the lower of 8% or the highest lawful rate. In August 2013, the notes converted into 222,668 shares of Series D-1 convertible preferred stock reflecting conversion of the $5.0 million principal amount and $0.2 million of accrued interest.

Outstanding borrowings consisted of the following (in thousands):

 

     December 31,      June 30,  
     2013      2014      2015  
                   (unaudited)  

Revolving line of credit

   $ 6,000       $ 4,273       $ —     

Term loan, current

     2,594         6,476         3,998   

Term loan, non-current

     6,307         —           10,135   
  

 

 

    

 

 

    

 

 

 

Total

   $ 14,901       $ 10,749       $ 14,133   
  

 

 

    

 

 

    

 

 

 

Future repayments on outstanding borrowings (excluding unamortized discount of $0.1 million as of December 31, 2014) are as follows (in thousands):

 

Year ending December 31,

      

2015

   $ 7,873   

2016

     3,000   
  

 

 

 
   $ 10,873   
  

 

 

 

Future repayments on outstanding borrowings (excluding unamortized discount of $0.9 million as of June 30, 2015) are as follows: (in thousands)

 

Year ending December 31,

      

2015

   $ 1,000   

2016

     6,000   

2017

     6,000   

2018

     2,000   
  

 

 

 
   $ 15,000   
  

 

 

 

Interest expense incurred under our borrowings was $2.7 million, $0.8 million, $0.4 million and $0.5 million for the years ended December 31, 2013 and 2014, and the six months ended June 30, 2014 and 2015, respectively.

Note 6. Segment Information.

We operate in one business segment, application-specific, feature-rich, ultra-low power NVM products. Our chief decision-maker, the President and Chief Executive Officer, evaluates our performance based on company-wide consolidated results. Revenue is evaluated based on product category and by geographic region.

 

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Product revenue from customers is designated based on the geographic region to which the product is delivered. Revenue by geographic region was as follows (in thousands):

 

     Year Ended December 31,      Six Months Ended June 30,  
         2013              2014              2014              2015      
                   (unaudited)  

United States

   $ 7,679       $ 7,318       $ 3,908       $ 3,981   

Rest of Americas

     900         751         313         334   

Europe

     8,370         7,261         4,935         2,525   

Asia Pacific

     32,467         25,885         11,764         13,261   

Rest of world

     268         250         142         189   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 49,684       $ 41,465       $ 21,062       $ 20,290   
  

 

 

    

 

 

    

 

 

    

 

 

 

Long-lived assets are attributed to the geographic region were they are located. Long-lived assets by geographic region were as follows (in thousands):

 

     December 31,      June 30,  
         2013              2014              2015      
                   (unaudited)  

United States

   $ 1,216       $ 620       $ 432   

Asia Pacific

     1,414         1,105         627   

Rest of world

     115         —           —     
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,745       $ 1,725       $ 1,059   
  

 

 

    

 

 

    

 

 

 

Note 7. Commitments and Contingencies.

Operating Leases.

We lease facilities under non-cancellable lease agreements which expire in August 2015. Rent expense under operating leases was $0.7 million for each of the years ended December 31, 2013 and 2014, and $0.3 million and $0.4 million for the six months ended June 30, 2014 and 2015, respectively. Future minimum lease payments under operating leases for 2015 are $0.2 million.

Capital Leases.

We have entered into various lease agreements for equipment and software under capital leases with terms of between 24 to 48 months. The equipment and software under the leases are collateral for the lease obligations and are included within property, plant and equipment, net, on the consolidated balance sheets. Future minimum commitments for capital leases as of December 31, 2014 are as follows (in thousands):

 

Payments due in 2015

   $ 75   
  

 

 

 

Total minimum lease payments

     75   

Less: Amounts representing interest

     (13
  

 

 

 

Present value of capital lease obligations and current portion of capital lease obligations

   $ 62   
  

 

 

 

Obligations under capital leases are included in accrued expenses and other current liabilities in the consolidated balance sheets.

 

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Equipment acquired under capital leases is included in property and equipment, net and consisted of the following (in thousands):

 

     December 31,      June 30,
2015
 
     2013      2014     
                   (unaudited)  

Computer software

   $ 108       $ 108       $ 108   

Office equipment

     49         49         49   

Machinery and equipment

     44         44         44   
  

 

 

    

 

 

    

 

 

 

Property and equipment, at cost

     201         201         201   

Accumulated depreciation and amortization

     (81      (114      (161
  

 

 

    

 

 

    

 

 

 

Total

   $ 120       $ 87       $ 40   
  

 

 

    

 

 

    

 

 

 

Purchase Commitments.

As of December 31, 2014 we had purchase commitments with our third-party foundries and other suppliers of $4.3 million due within one year, of which $0.6 million has been accrued as a loss on wafer purchase commitments.

Litigation.

Although we are not currently subject to any litigation, and no litigation is currently threatened against us, we may be subject to legal proceedings, claims and litigation, including intellectual property litigation, arising in the ordinary course of business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. We accrue amounts that we believe are adequate to address any liabilities related to legal proceedings and other loss contingencies that we believe will result in a probable loss that is reasonably estimable.

Indemnification .

During the normal course of business, we may make certain indemnities, commitments and guarantees which may include intellectual property indemnities to certain of our customers in connection with the sales of our products and indemnities for liabilities associated with the infringement of other parties’ technology based upon our products. Our exposure under these indemnification provisions is generally limited to the total amount paid by a customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in such capacities.

We have not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets. Where necessary, we accrue for losses for any known contingent liabilities, including those that may arise from indemnification provisions, when future payment is probable.

 

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Note 8. Convertible Preferred Stock and Convertible Preferred Stock Warrants

Convertible Preferred Stock.

We have authorized and issued Series A preferred stock (“Series A”), Series B preferred stock (“Series B”), Series C preferred stock (“Series C”), Series D preferred stock (“Series D”), Series D-1 preferred stock (“Series D-1”), and Series E preferred stock (“Series E”). Preferred stock consisted of the following:

 

     Shares
Authorized
     Shares Issued and
Outstanding
     Aggregate Liquidation
Value
     Carrying
Value
 
     (in thousands, except shares)  

Series A

     1,087,663         1,082,248       $ 12,000       $ 11,836   

Series B

     1,311,000         1,303,616         15,900         15,815   

Series C

     837,962         837,957         19,357         19,257   

Series D

     518,342         446,565         14,000         13,958   

Series D-1

     222,861         222,668         5,236         5,236   

Series E

     675,758         526,799         61,932         12,365   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,653,586         4,419,853       $ 128,425       $ 78,467   
  

 

 

    

 

 

    

 

 

    

 

 

 

The rights, preferences and privileges of our preferred stock are as follows:

Dividends. Holders of preferred stock are entitled to receive, pari passu but in preference to the common stockholders, when and as declared by our Board of Directors, but only out of funds that are legally available therefore, non-cumulative cash dividends at the annual rate of eight percent of the original issue price as follows:

 

Class of Shares

   Dividend Per
Share
 

Series A

   $ 0.88704   

Series B

   $ 0.97581   

Series C

   $ 1.84800   

Series D

   $ 2.50800   

Series D-1

   $ 1.88100   

Series E

   $ 1.88100   

No dividends have been declared to date.

Liquidation. The holders of preferred stock and certain of our employees who are eligible to participate in a Management Carve-out Plan have preferences over the holders of common stock in the event of any voluntary or involuntary liquidation, dissolution or winding up of the company, including a merger, consolidation or sale of assets (each a “liquidation event”). These holders have the right to redeem their shares only upon a liquidation event. The amount to be paid per share for the preferred stock is $11.088 for Series A, $12.1968 for Series B, $23.10 for Series C, $31.35 for Series D, $23.5125 for Series D-1 and an aggregate of $117.5625 for Series E (each as adjusted for certain recapitalization events) plus any declared and unpaid dividends. Holders of Series E are entitled to receive $70.5375 prior and in preference to other holders of preferred stock and the employees eligible to participate in the Management Carve-out Plan to be adopted by our Board of Directors upon a liquidation event. We have set aside an aggregate amount of up to 10% of the proceeds from the liquidation event for payments to such employees (the “Management Carve-out Payments”). The Management Carve-out Payments are made before any payments to the holders of Series D-1, Series D, Series C, Series B, Series A or common stock. After the Management Carve-out Payments holders of Series E are entitled to receive a second payment of $47.025 prior to the other holders of preferred stock and then the Series D-1 and Series D are entitled to receive their liquidation preference pari passu, followed by the Series C, the Series B and the Series A.

Thereafter, any remaining assets available for distribution would be distributed on a pro rata basis to the holders of preferred stock (on an as converted basis) and common stock based on the number of shares of common stock held by each stockholder. If upon liquidation, our assets are not sufficient to permit payment of the full liquidation preference of the preferred stock, the assets will be distributed first to the holders of Series E on a pro rata basis based on the number of shares held by each Series E stockholder, then the Management Carve-out

 

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Index to Financial Statements

Payments, then to the Series D and Series D-1 together on a pro rata basis, and then sequentially to each of the Series C, Series B and series A on a pro rata basis until all assets have been distributed.

Voting. Each holder of preferred stock is entitled to one vote for each share of common stock into which such holder’s shares of preferred stock is then convertible. The holders of preferred stock vote together with the holders of common stock as a single class unless otherwise provided by law or our articles of incorporation.

Conversion. Each outstanding share of preferred stock is convertible, at the holder’s option into shares of common stock at a conversion rate determined by dividing the original issue price for such share by the then applicable conversion price for such share, with the conversion price subject to adjustment in the event of certain anti-dilutive issuances of shares of common stock. As of December 31, 2014, each share of Series A, Series B, Series C, Series D-1 and Series E would convert at the holder’s option into common stock on a one-for-one basis and the Series D would convert at the holder’s option on an approximately 1-to-1.03 basis.

Each share of Series A, Series B, Series C, Series D and Series D-1 will automatically convert at the then-effective conversion rate into shares of common stock upon the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement under the Securities Act of 1933, with gross proceeds to us of not less than $30 million (“qualified IPO”), and each share of Series E will automatically convert on a 1-to-9.8841 basis in the event of a qualified IPO. In addition, each share of preferred stock will automatically convert at the then-effective conversion ratio into shares of common stock upon receipt by us of a written request for such conversion from the holders of (a) 90% of the Series E and (b) two-thirds of each other series of preferred stock.

Preferred Stock Warrants.

As of the dates below, outstanding preferred stock warrants and associated fair values are as follows (fair value in thousands):

 

Class of

Shares

   Number
of

Shares
     December 31,      June 30,
2015
     Exercise
Price
Per Share
           
      2013      2014            Issuance date    Expiration date
                   (unaudited)                   

Series A

     5,411       $ 1       $ —         $ —         $ 11.0880       2008    2015

Series B

     7,378         6         6         —         $ 12.1968       2010    2017

Series D

     71,769         255         60         —         $ 31.3500       2012-2013    2019

Series E

     33,385         —           56         903       $ 23.5125       2014-2015    2022-2024
  

 

 

    

 

 

    

 

 

    

 

 

          
     117,943       $ 262       $ 122       $ 903            
  

 

 

    

 

 

    

 

 

    

 

 

          

In connection with a capital lease financing in January 2008, we issued a warrant to purchase 5,411 shares of Series A at $11.088 per share. In January 2015, this warrant expired unexercised.

In connection with a capital lease financing in February 2010, we issued a warrant to purchase 7,378 shares of Series B at $12.1968 per share. The warrants are exercisable any time at the option of the holder and expire at the earlier of February 2017, an initial public offering, or an acquisition. This warrant was initially valued at $57,000 and recorded as a liability.

Pursuant to a joint development agreement we entered into with a third party in May 2010, we issued a warrant in March 2012 to purchase 86,580 shares of Series C at an exercise price of $23.10 per share. Of these, 64,935 were exercised in 2012 and 21,645 were exercised in 2013 in conjunction with a release of a liability. This warrant was initially valued at $1.5 million and recorded as a liability.

 

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In connection with a term loan financing with Opus Bank, in September 2012 we issued a warrant to purchase 35,885 shares of Series D at a price per share of $31.35. In addition, in connection with a first amendment of the term loan financing with Opus Bank, on each of March 31, 2013 and June 30, 2013 we issued to Opus Bank a warrant to purchase 17,942 shares of Series D at a price per share of $31.35. The warrants were exercisable any time at the option of the holder and expire at the earlier of September 2019, an initial public offering, or an acquisition. The warrants were initially valued at $1.3 million and recorded as a liability.

In connection with a BFA Modification agreement with Bridge Bank, in October 2014 we issued a warrant to purchase 1,488 shares of Series E at a price per share of $23.5125. The warrant was exercisable any time at the option of the holder and expires at the earlier of October 2024, an initial public offering, or an acquisition. The warrant was initially valued at $0.1 million and recorded as a liability.

As of December 31, 2013 and 2014 and June 30, 2015, the fair value of preferred stock warrants was $0.3 million, $0.1 million and $0.9 million, respectively, and classified as long-term liabilities, as the warrants primarily expire in periods beyond one year from December 31, 2014. The warrants are subject to re-measurement at each balance sheet date with any change in fair value recognized as a component of other income (expense), net in our consolidated statements of operations.

During the years ended December 31, 2013 and 2014 and the six months ended June 30, 2014 and 2015, we recorded income of $1.2 million, $0.2 million, $28,000 and $81,000 respectively, for the change in fair value of these warrants. We will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants or the completion of a liquidation event, including the completion of a qualified initial public offering, at which time all preferred stock warrants will be converted into warrants to purchase common stock and, accordingly, the liability will be reclassified to additional paid-in capital.

Note 9. Common Stock, Common Stock Warrants and Stock Option Plan.

Common Stock.

We were authorized to issue 6,666,666 shares of common stock with no par value per share as of December 31, 2013 and 2014 and 14,696,969 shares of common stock with no par value per share as of June 30, 2015. Each holder of common stock is entitled to one vote per share. The holders of common stock are also entitled to receive dividends, when and if declared by our Board of Directors, subject to the consent of two-thirds of the outstanding preferred stock and their preferential dividend rights.

Common Stock Reserved for Future Issuance.

As of December 31, 2014 and June 30, 2015, we had reserved shares of common stock for future issuances as follows:

 

     December 31,
2014
     June 30,
2015
 
           

(unaudited)

 

Preferred stock

     9,114,739         9,114,739   

Warrants to purchase preferred stock

     86,046         411,499   

Warrants to purchase common stock

     218,618         218,618   

Stock option plan:

     

Options outstanding

     604,412         744,855   

Options available for future grants

     148,633         1,867,243   
  

 

 

    

 

 

 

Total

     10,172,448         12,356,954   
  

 

 

    

 

 

 

 

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Index to Financial Statements

Common Stock Warrants.

As of December 31, 2014 and June 30, 2015, outstanding common stock warrants were as follows:

 

Total amount of securities

issuable under the

outstanding warrants

   Exercise
Price
   Issuance
date
   Expiration
date
    114,784         $ 1.98          2009          2016  
    28,696         $ 1.98          2011          2016  
    75,138         $ 3.96          2011          2018  
 

 

 

                
    218,618                  
 

 

 

                

Common stock warrants are convertible at the option of the holder any time after the date of issuance into shares of our common stock. The aggregate amount of shares of common stock that would be issued is determined by dividing the exercisable price by the conversion price applicable on the date of conversion multiplied by the number of warrants exercised. When a public market exists for our common stock, the conversion price is equal to certain quoted prices for our common stock five trading days prior to the date of conversion. When no public market exists for our common stock, the fair value is determined by our Board of Directors. When a warrant is exercised in connection with our initial public offering, the conversion price is equal to the per share offering price to the public in the initial public offering.

2007 Equity Incentive Plan.

In 2007, our Board of Directors and shareholders approved the 2007 Equity Incentive Plan (the “2007 Plan”) under which 272,727 shares of common stock were reserved and available for the issuance of stock options and restricted stock to eligible participants. The 2007 Plan has been subsequently amended to increase the number of shares of common stock reserved for issuance under the 2007 Plan to 787,878 and during the six months ended June 30, 2015, the number of shares reserved for issuance under the 2007 Plan has been increased to 2,651,515. Options and restricted stock awards may be granted at a price per share not less than the 85% of the fair value at the date of grant or award, respectively. Restricted stock awarded to persons controlling more than 10% of our stock may be granted at a price per share not less than the 100% of the fair value at the date of the award. Options granted to new employees generally vest over a four-year period with 25% vesting at the end of one year and the remaining to vest monthly thereafter, while options granted to existing employees generally vest over a four-year period. Options granted generally are exercisable up to 10 years.

 

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A summary of stock option activity under the 2007 Plan is as follows:

 

     Stock Options  
     Shares     Weighted-
Average
Exercise
Price
     Weighted-
Average
Remaining
Contractual
Term
(Years)
     Aggregate
Intrinsic
Value
 
     (aggregate intrinsic value in thousands)  

Outstanding as of December 31, 2012

     369,682      $ 2.29         

Granted

     228,288        5.61         

Exercised

     (2,392     2.60          $ —     

Canceled

     (30,313     2.78         
  

 

 

         

Outstanding as of December 31, 2013

     565,265        3.60         5.9      

Granted

     110,085        1.65         

Exercised

     (20,398     1.66          $ —     

Canceled

     (50,540     3.96         
  

 

 

         

Outstanding as of December 31, 2014

     604,412        1.57         6.8       $ —     

Granted (unaudited)

     145,731        3.30         

Exercised (unaudited)

     (4,583     1.65         

Canceled (unaudited)

     (705     1.65         
  

 

 

         

Outstanding as of June 30, 2015 (unaudited)

     744,855      $ 1.92         6.8       $ 1,967   
  

 

 

         

Options vested and expected to vest as of June 30, 2015 (unaudited)

     701,145      $ 1.89         6.7       $ 1,852   
  

 

 

         

Options vested and exercisable as of June 30, 2015 (unaudited)

     463,698      $ 1.60         5.3       $ 1,378   
  

 

 

         

Additional information regarding stock options outstanding and vested as of December 31, 2014 is summarized below:

 

     Options Outstanding      Options Vested and
Exercisable
 

Exercise Prices

   Number of
Stock
Options
Outstanding
     Weighted-
Average
Remaining
Contractual
Life (Years)
     Weighted-
Average
Exercise
Price per
Share
     Shares
Subject
to Stock
Options
     Weighted-
Average
Exercise
Price per
Share
 

$0.99

     63,696         0.2       $ 0.99         63,696       $ 0.99   

$1.65

     540,716         7.3         1.65         349,934         1.65   
  

 

 

          

 

 

    

$0.99-$1.65

     604,412         6.8         1.57         413,630         1.55   
  

 

 

          

 

 

    

Additional information regarding stock options outstanding and vested as of June 30, 2015 is summarized below (unaudited):

 

     Options Outstanding      Options Vested and
Exercisable
 

Exercise Prices

   Number of
Stock
Options
Outstanding
     Weighted-
Average
Remaining
Contractual
Life (Years)
     Weighted-
Average
Exercise
Price per
Share
     Shares
subject
to Stock
Options
     Weighted-
Average
Exercise
Price per
Share
 

$0.99

     63,696         0.1       $ 0.99         63,696       $ 0.99   

$1.65

     535,428         6.6         1.65         387,524         1.65   

$3.30

     145,731         9.8         3.30         12,478         3.30   
  

 

 

          

 

 

    

$0.99-$3.30

     744,855         6.8         1.92         463,698         1.60   
  

 

 

          

 

 

    

 

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Note 10. Stock-based Compensation.

We record stock-based compensation based on fair value as of the grant date using the Black-Scholes option-pricing model. We recognize such costs as compensation expense on a straight-line basis over the employee’s requisite service period, which is generally four years. Our valuation assumptions are as follows:

Fair value of common stock. Given the absence of a public trading market, our Board of Directors considered numerous objective and subjective factors to determine the fair value of our common stock which included, but were not limited to (i) independent third-party valuations of common stock; (ii) the rights and preferences of our preferred stock relative to common stock; (iii) the lack of marketability of common stock; (iv) developments in the business; and (v) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the company, given prevailing market conditions.

Risk-free interest rate. We base the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent expected term of the options for each option group.

Expected term. The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term assumption is based on the simplified method in which the expected term is equal to the average of the stock-based award’s weighted-average vesting period and its contractual term. We expect to continue using the simplified method until sufficient information about historical behavior is available.

Volatility. We determine volatility based on the historical stock volatilities of a group of publicly listed guideline companies over a period equal to the expected terms of the options, as we do not have any trading history to determine the volatility of our common stock.

Dividend yield. We have never declared or paid any cash dividend and do not currently plan to pay a cash dividend in the foreseeable future. Consequently, we used an expected dividend yield of zero.

The following table summarizes the weighted-average assumptions used in the Black-Scholes option-pricing model to determine fair value of stock options:

 

     Year Ended December 31,     Six Months
Ended
June 30,

    2015    
 
         2013             2014        
                 (unaudited)  

Volatility

     63 %     67 %     70

Expected dividend yield

     —          —          —     

Risk-free rate

     1.06 %     1.84 %     1.62

Expected term (in years)

     6        6        5   

The following table presents the effects of stock-based compensation during the periods (in thousands):

 

     Year Ended December 31,      Six Months Ended June 30,  
         2013              2014              2014              2015      
                  

(unaudited)

 

Cost of revenue

   $ 1       $ 4       $ 2       $ 3   

Research and development

     95         86         41         41   

Sales and marketing

     13         30         7         21   

General and administrative

     55         126         27         47   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 164       $ 246       $ 77       $ 112   
  

 

 

    

 

 

    

 

 

    

 

 

 

We did not realize any income tax benefit from stock option exercises in either of the periods presented due to recurring losses and valuation allowances.

 

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As of December 31, 2014, the total unrecognized compensation cost related to stock options, net of estimated forfeitures, was approximately $0.4 million, and this amount is expected to be recognized over a weighted-average period of approximately 2 years.

Stock Option Repricing.

In August 2014, our Board of Directors approved a common stock option repricing program whereby previously granted and unexercised options held by current employees with exercise prices above $1.65 per share were repriced on a one-for-one basis to $1.65 per share which represented the per share fair value of our common stock as of the date of the repricing. There was no other modification to the vesting schedule of the previously issued options. As a result, 387,830 unexercised options originally granted to purchase common stock at prices ranging from $1.98 to $5.61 per share were repriced under this program.

We treated the repricing as a modification of the original awards and calculated additional compensation costs for the difference between the fair value of the modified award and the fair value of the original award on the modification date. The repricing resulted in incremental stock-based compensation expense of $0.2 million. Expense related to vested shares was expensed on the repricing date and expense related to unvested shares is being amortized over the remaining vesting period of such stock options.

Note 11. Income Taxes.

The components of loss before provision for income taxes are as follows:

 

     Year ended December 31,  
         2013              2014      
     (in thousands)  

United States

   $ (8,149    $ (7,885

Foreign

     68         (909
  

 

 

    

 

 

 

Loss before provision for income taxes

   $ (8,081    $ (8,794
  

 

 

    

 

 

 

We provide reserves for U.S. income taxes on the earnings of our foreign subsidiaries, unless the subsidiaries’ earnings are considered indefinitely reinvested outside the United States. As of December 31, 2014, U.S. income taxes were not provided for undistributed earnings from our foreign subsidiaries as they were not material. The components of the provision for income taxes are as follows:

 

     Year Ended December 31,  
         2013              2014      
     (in thousands)  

Current:

     

Federal

   $ —         $ —     

State

     1         3   

Foreign

     58         123   
  

 

 

    

 

 

 

Total current provision for income taxes

     59         126   
  

 

 

    

 

 

 

Deferred:

     

Federal

     13         14   

State

     —           —     
  

 

 

    

 

 

 

Total deferred provision for income taxes

     13         14   
  

 

 

    

 

 

 

Total

   $ 72       $ 140   
  

 

 

    

 

 

 

 

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Index to Financial Statements

Reconciliation of the statutory federal income tax to our effective tax consisted of the following:

 

     Year ended December 31,  
         2013          2014      
     (in thousands)  

Federal tax at statutory rate

   $ (2,772    $ (2,989

State taxes

     (167      (185

Foreign rate differential

     29         310   

Nondeductible expenses

     96         92   

Research and development credit

     —           (481

Stock compensation

     52         74   

Valuation allowance

     2,834         3,319   
  

 

 

    

 

 

 

Total

   $ 72       $ 140   
  

 

 

    

 

 

 

Deferred tax assets and liabilities consisted of the following:

 

     December 31,  
     2013      2014  
     (in thousands)  

Deferred tax assets:

     

Net operating loss carry forwards

   $ 20,999       $ 22,688   

Accruals and reserves

     2,300         4,241   

Amortization of intangible assets

     1,482         2,648   

Tax credit carry forwards

     1,462         2,127   

Depreciation

     99         99   

Other

     12         22   
  

 

 

    

 

 

 

Gross deferred tax assets

     26,354         31,825   

Valuation allowance

     (26,354      (29,673
  

 

 

    

 

 

 

Total deferred tax assets

     —           2,152   
  

 

 

    

 

 

 

Deferred tax liabilities:

     

Change in tax accounting method for reserves and allowances

     —           (2,152

Amortization of intangible assets

     (13      (27
  

 

 

    

 

 

 

Total deferred tax liabilities

     (13      (2,179
  

 

 

    

 

 

 

Net deferred tax liability

   $ (13    $ (27
  

 

 

    

 

 

 

A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. We have established a valuation allowance to offset net deferred tax assets as of December 31, 2013 and 2014 due to the uncertainty of realizing future tax benefits from its net operating loss (“NOL”) carry forwards and other deferred tax assets. The net change in the total valuation allowance for the years ended December 31, 2013 and 2014 was an increase of approximately $2.7 million and $3.3 million, respectively.

As of December 31, 2014, we had federal and state NOL carry forwards of approximately $57.8 million and $51.5 million, respectively, expiring beginning in 2027 for federal and 2017 for state. As of December 31, 2014, we had federal and state research credit carry forwards of approximately $2.5 million and $2.7 million, respectively, expiring beginning in 2027 for federal; the state research and development tax credit carry forwards do not expire.

 

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Internal Revenue Code Section 382 places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by NOL carry forwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. Our capitalization described herein may have resulted in such a change. Generally, after a control change, a loss corporation cannot deduct NOL carry forwards in excess of the Section 382 Limitation. Management has not yet determined the impact such limitation may have on the utilization of our NOL carry forwards against our taxable income in future periods.

As of December 31, 2014, we had unrecognized tax benefits of approximately $3.0 million. It is unlikely that the amount of liability for unrecognized tax benefits will significantly change over the next twelve months. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2014, there was a liability of $0.1 million related to uncertain tax positions recorded in income taxes payable on the consolidated financial statements.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

Balance as of December 31, 2012

   $ 1,595   

Tax positions related to the current year:

  

Additions

     615   
  

 

 

 

Balance as of December 31, 2013

     2,210   

Tax positions related to the current year:

  

Additions

     774   
  

 

 

 

Balance as of December 31, 2014

   $ 2,984   
  

 

 

 

Note 12. Net Loss Per Share.

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except share and per share data):

 

     Year Ended
December 31,
    Six Months Ended June 30,  
     2013     2014     2014     2015  
           (unaudited)  

Net loss attributable to common stockholders:

        

Numerator:

        

Basic and diluted:

        

Net loss

   $ (8,153   $ (8,934   $ (5,183   $ (4,043
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted average shares used in computing net loss per share attributable to common stockholders:

        

Basic and diluted

     538,388        542,245        593,228        560,694   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders:

        

Basic and diluted

   $ (15.14   $ (16.48   $ (9.61   $ (7.21
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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:

 

     Year Ended December 31,      Six Months Ended
June 30,
 
     2013      2014      2014      2015  
                   (unaudited)  

Shares not used in computing net loss per share attributable to common stockholders as considered anti-dilutive:

           

Preferred stock

     9,114,739         9,114,739         9,114,739         9,114,739   

Stock options

     565,268         604,412         562,246         744,855   

Preferred stock warrants

     84,558         86,046         84,558         112,532   

Common stock warrants

     218,618         218,618         218,618         218,618   

Unaudited Pro Forma Net Loss per Share.

Pro forma basic and diluted net loss per share have been computed to give effect, even if antidilutive, to the conversion of our preferred stock into common stock as of the beginning of the period presented or the original issuance date, if later.

The following table shows our calculation of the unaudited pro forma basic and diluted net loss per share (in thousands, except share and per share data):

 

     Year Ended
December 31, 2014
     Six Months Ended 
June 30, 2015
 
            (unaudited)  

Numerator:

     

Net loss

   $ (8,934    $ (4,043
  

 

 

    

 

 

 

Denominator:

     

Weighted average shares used in computing pro forma net income per share, basic

     542,245         560,694   

Pro forma adjustments to reflect assumed conversion of convertible preferred stock

     9,114,739         9,114,739   
  

 

 

    

 

 

 

Weighted average shares used in computing pro forma net income per share, basic and diluted

     9,656,984         9,675,433   
  

 

 

    

 

 

 

Pro forma net loss per share:

     

Basic and diluted

   $ (0.93    $ (0.42
  

 

 

    

 

 

 

Note 13. Purchase of Serial Flash Memory Product Assets.

In September 2012, we completed the purchase of the serial flash memory product assets from Atmel Corporation. The aggregate purchase price for these assets was $25.0 million and was accounted for as a business combination. The excess of the purchase price over the fair value allocated to the net assets is goodwill. The key factors attributable to the creation of goodwill by the transaction are synergies in technology, operations, existing customer base and cash flow generated from revenue. The estimated fair value of finite-lived intangible assets and tangible assets were determined as follows (i) customer relationships and customer backlog were determined using the excess earnings approach, (ii) developed technology was determined using the royalty method, (iii) non-compete agreement was determined using the income approach, (iv) inventories were estimated using the cost approach and (v) property and equipment was estimated using replacement value.

 

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The following table summarizes the allocation of the purchase price to the tangible and intangible assets purchased as of the date of purchase (in thousands):

 

Finite-lived intangible assets:

  

Developed technology

   $ 4,282   

Customer relationships

     9,011   

Customer backlog

     2,779   

Non-compete agreement

     282   
  

 

 

 

Total

     16,354   
  

 

 

 

Tangible assets:

  

Inventories

     8,365   

Property and equipment

     259   
  

 

 

 

Total

     8,624   
  

 

 

 

Indefinite-lived intangible asset:

  

Goodwill

     22   
  

 

 

 
   $ 25,000   
  

 

 

 

Note 14. Other Income (Expense), Net.

Other income (expense), net consisted of the following (in thousands):

 

     Year Ended December 31,      Six Months Ended June 30,  
         2013              2014              2014              2015      
                   (unaudited)  

Remeasurement of preferred stock warrant liability

   $ 1,200       $ 206       $ 28       $ 81   

Other income (expense), net

     (692      (92      15         208   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 508       $ 114       $ 43       $ 289   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 15. Subsequent Events.

Opus Bank Credit Facility

In April 2015, we entered into a new three-year $15.0 million credit agreement, or the new term loan facility, which replaced our prior senior secured revolving credit and term loan facility. The agreement provides for senior secured term loan facility, in an aggregate principal amount of up to $15.0 million to be used for general corporate purposes including working capital, to repay certain indebtedness and for capital expenditures and other expenses. Interest will accrue on any outstanding borrowings at a rate equal to (a) the higher of (i) the prime rate (as publicly announced from time to time by the Wall Street Journal) and (ii) 3.25% plus (b) (i) 1.00% if our cash and cash equivalents are greater than 125% of the outstanding principal of our borrowings under the new term loan facility, or (ii) 2.00% if our cash and cash equivalents are less than or equal to than 125% of such borrowings. Indebtedness we incur under this agreement is secured by substantially all of our assets and contains financial covenants requiring us to maintain a monthly asset coverage ratio of not less than 1.00:1.00 through September 30, 2015 and 1.10:1.00 thereafter, and a certain level of quarterly adjusted EBITDA (measured on a trailing three-month basis). This agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, merge or consolidate and make acquisitions. Upon an occurrence of an event of default, we could be required to pay interest on all outstanding obligations under the agreement at a rate of five percent above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement. As of May 14, 2015, we were in compliance with all financial covenants and

 

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restrictions and had borrowings of $15.0 million outstanding. We may not draw additional funds under the new term loan facility and our borrowings mature on April 30, 2018.

2007 Equity Incentive Plan

On April 29, 2015, our Board of Directors reserved an additional 1,863,636 shares of common stock for issuance under our 2007 Equity Incentive Plan.

2015 Equity Incentive Plan

In September 2015, our board of directors adopted, and in October 2015 our stockholders approved, our 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan will become effective on the date immediately prior to the date of an IPO and will serve as the successor to our 2007 Plan. Any remaining shares available for issuance under our 2007 Plan will become shares reserved for issuance under our 2015 Equity Incentive Plan, and we will cease granting awards under our 2007 Plan. The number of shares reserved for issuance under our 2015 Equity Incentive Plan will increase automatically on the 1st day of January of each of 2016 through 2025 by the number of shares equal to 4% of the total outstanding shares of our common stock as of the immediately preceding December 31. However, our board of directors may reduce the amount of the increase in any particular year.

Our 2015 Equity Incentive Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, restricted stock units, performance awards and stock bonuses. No person will be eligible to receive more than 2,000,000 shares in any calendar year under our 2015 Equity Incentive Plan other than a new employee of ours, who will be eligible to receive no more than 4,000,000 shares under the plan in the calendar year in which the employee commences employment. The aggregate number of shares of our common stock that may be subject to awards granted to any one non-employee director pursuant to the 2015 Equity Incentive Plan in any calendar year shall not exceed 300,000. Our 2015 Equity Incentive Plan provides that no more than 25,000,000 shares will be issued as incentive stock options.

2015 Employee Stock Purchase Plan

In September 2015, our board of directors adopted, and in October 2015 our stockholders approved, our 2015 Employee Stock Purchase Plan. The 2015 Employee Stock Purchase Plan will become effective on the date of an IPO. We reserved 150,000 shares of our common stock for issuance under our 2015 Employee Stock Purchase Plan. The number of shares reserved for issuance under our 2015 Employee Stock Purchase Plan will increase automatically on the 1st day of January following the first offering date by the number of shares equal to 1% of the total outstanding shares of our common stock as of the immediately preceding December 31 (rounded to the nearest whole share). However, our board of directors may reduce the amount of the increase in any particular year. The aggregate number of shares issued over the term of our 2015 Employee Stock Purchase Plan will not exceed 2,250,000 shares of our common stock.

Under our 2015 Employee Stock Purchase Plan, eligible employees will be able to acquire shares of our common stock by accumulating funds through payroll deductions. Eligible employees will be able to select a rate of payroll deduction up to 15% of their base cash compensation. The purchase price for shares of our common stock purchased under our 2015 Employee Stock Purchase Plan will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period. Except for the first offering period, each offering period will run for no more than six months, with purchases occurring every six months. The first offering period will begin upon the date of this prospectus and will end approximately six months later.

No participant will have the right to purchase shares of our common stock in an amount that have a fair market value of more than $25,000, determined as of the first day of the applicable purchase period, for each calendar

 

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year in which that right is outstanding. In addition, no participant will be permitted to purchase more than 2,500 shares during any one purchase period or a lesser amount determined by our compensation committee.

Our 2015 Employee Stock Purchase Plan will continue until the earlier to occur of its termination by our board of directors, the issuance of all shares reserved for issuance under it or the tenth anniversary of its effective date.

Reverse Stock Split

On October 1, 2015, we effected a 1-for-33 reverse split of our common stock and convertible preferred stock.

 

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4,100,000 Shares

 

LOGO

Common Stock

 

Needham & Company   Oppenheimer & Co.

Roth Capital Partners

 

 

 


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Index to Financial Statements

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses to be paid by the Registrant in connection with the sale of the shares of common stock being registered hereby. All amounts are estimates except for the SEC registration fee, the FINRA filing fee and the NASDAQ listing fee.

 

SEC registration fee

   $ 6,473   

FINRA filing fee

     8,987   

NASDAQ listing fee

     150,000   

Printing and engraving

     250,000   

Legal fees and expenses

     1,300,000   

Accounting fees and expenses

     400,000   

Road show expenses

     25,000   

Blue sky fees and expenses

     15,000   

Transfer agent and registrar fees and expenses

     15,000   

Miscellaneous

     329,540   
  

 

 

 

Total

   $ 2,500,000   
  

 

 

 

ITEM 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the Delaware General Corporation Law are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act of 1933, as amended, or Securities Act.

As permitted by the Delaware General Corporation Law, the Registrant’s restated certificate of incorporation contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except for liability:

 

    for any breach of the director’s duty of loyalty to the Registrant or its stockholders;

 

    for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

 

    under Section 174 of the Delaware General Corporation Law (regarding unlawful dividends and stock purchases); or

 

    for any transaction from which the director derived an improper personal benefit.

As permitted by the Delaware General Corporation Law, the Registrant’s amended and restated bylaws provide that:

 

    the Registrant is required to indemnify its directors and officers to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions;

 

    the Registrant may indemnify its other employees and agents as set forth in the Delaware General Corporation Law;

 

    the Registrant is required to advance expenses, as incurred, to its directors and officers in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and

 

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    the rights conferred in the bylaws are not exclusive.

Prior to the closing of the offering that is the subject of this Registration Statement, the Registrant intends to enter into indemnification agreements with each of its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the Registrant’s restated certificate of incorporation and amended and restated bylaws and to provide additional procedural protections. At present, there is no pending litigation or proceeding involving a director, executive officer or employee of the Registrant for which indemnification is sought. Reference is also made to Section 5 of the Underwriting Agreement, which provides for the indemnification of executive officers, directors and controlling persons of the Registrant against certain liabilities. The indemnification provisions in the Registrant’s restated certificate of incorporation and amended and restated bylaws and the indemnification agreements entered into or to be entered into between the Registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the Registrant’s directors and executive officers for liabilities arising under the Securities Act.

The Registrant has directors’ and officers’ liability insurance for securities matters.

In addition, Messrs. Andreev and Crandell are indemnified by their employers with regard to serving on the Registrant’s board of directors.

Reference is made to the following documents filed as exhibits to this Registration Statement regarding relevant indemnification provisions described above and elsewhere herein:

 

Exhibit Document

   Number  

Form of Underwriting Agreement

     1.01   

Form of Restated Certificate of Incorporation of the Registrant

     3.02   

Form of Amended and Restated Bylaws of the Registrant

     3.04   

Amended and Restated Investors’ Rights Agreement by and among the Registrant and the preferred stockholders of the Registrant

     4.02   

Form of Indemnification Agreement

     10.01   

ITEM 15. Recent Sales of Unregistered Securities.

Since January 1, 2012, the Registrant has issued and sold the following securities:

 

  1. Between January 1, 2012 and September 30, 2015, the Registrant granted options to employees, consultants and directors to purchase an aggregate of 545,786 shares of common stock under its 2007 Equity Incentive Plan.

 

  2. Between January 1, 2012 and September 30, 2015, the Registrant issued 30,690 shares of common stock to its employees, directors and consultants upon exercise of options granted by it under its 2007 Equity Incentive Plan, with exercise prices ranging from $1.65 to $3.30 per share, for an aggregate purchase price of $53,548.60.

 

  3. In March 2012, the Registrant issued a warrant to purchase 86,580 shares of the Registrant’s Series C convertible preferred stock to a foundry partner, with an exercise price of $23.10 per share. Of these, 64,935 shares were exercised in 2012 and the remaining 21,645 shares were exercised in September 2013, in conjunction with a release of a liability.

 

  4. In August 2012, the Registrant sold 446,565 shares of its Series D convertible preferred stock to twelve accredited investors at a per share price of $31.35, for an aggregate purchase price of approximately $14,000,000.

 

  5. In September 2012, March 2013 and June 2013, the Registrant issued warrants to purchase an aggregate of 71,769 shares of the Registrant’s Series D convertible preferred stock to a commercial lender, with an exercise price of $31.35 per share.

 

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  6. Between January and February 2013, the Registrant issued convertible notes in an aggregate principal amount of $5,000,000 to twelve accredited investors.

 

  7. In August 2013, the Registrant sold 222,668 shares of its Series D-1 convertible preferred stock to twelve accredited investors and 526,799 shares of its Series E convertible preferred stock to ten accredited investors, in each case at a per share price of $23.5125, for an aggregate purchase price of approximately $17,622,000, which included the conversion in full of the convertible notes described in item 6 above.

 

  8. In October 2014, the Registrant issued a warrant to purchase 1,488 shares of the Registrant’s Series E convertible preferred stock to a commercial lender, with an exercise price of $23.5125 per share.

 

  9. In April 2015, the Registrant issued a warrant to purchase 31,897 shares of the Registrant’s Series E convertible preferred stock to a commercial lender, with an exercise price of $23.5125 per share.

ITEM 16. Exhibits and Financial Statement Schedules.

(a) Exhibits.

 

Exhibit
Number

  

Exhibit Title

  1.01**    Form of Underwriting Agreement.
  3.01    Form of Restated Certificate of Incorporation of the Registrant, to be effective immediately upon the Registrant’s reincorporation in Delaware prior to this offering.
  3.02    Form of Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of this offering.
  3.03    Bylaws of the Registrant, as currently in effect.
  3.04    Form of Amended and Restated Bylaws of the Registrant, to be effective upon closing of this offering.
  4.01*    Amended and Restated Investors’ Rights Agreement by and among the Registrant and the preferred stockholders of the Registrant dated August 19, 2013.
  5.01**    Opinion of Fenwick & West LLP regarding the legality of the securities being registered.
10.01    Form of Indemnity Agreement.
10.02*    2007 Equity Incentive Plan and form of option grant.
10.03    2015 Equity Incentive Plan and forms of equity awards.
10.04    2015 Employee Stock Purchase Plan
10.05*   

Standard Industrial/Commercial Multi-Tenant Lease by and between the Registrant and DeGuigne Ventures, LLC dated May 3, 2011.

10.06†*    Technology License Agreement, as amended, by and between the Registrant and Axon Technologies Corporation, dated January 15, 2007.
10.07†*    Manufacturing Agreement by and between the Registrant and Altis Semiconductor dated September 28, 2012.
10.08*    Amended and Restated Employment Agreement, by and between the Registrant and Narbeh Derhacobian, dated August 16, 2013.
10.09*    Offer Letter, dated May 30, 2013, by and between the Registrant and Ron Shelton.
10.10*    Amended and Restated Offer of Employment, dated August 16, 2013, between the Registrant and Shane Hollmer.

 

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Exhibit
Number

  

Exhibit Title

10.11†*    Credit Agreement, dated April 30, 2015, among the Registrant, Artemis Acquisition LLC and Opus Bank
10.12†*    Cell Library License Agreement by and between the Registrant and Atmel Corporation, dated September 28, 2012.
10.13†*    Process Technology and IP License Agreement by and between the Registrant and Atmel Corporation, dated September 28, 2012.
23.01**    Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02    Consent of Burr Pilger Mayer, Inc., independent registered public accounting firm.
24.01*    Power of Attorney.

 

* Previously filed.
** To be filed by amendment.
Registrant has omitted portions of the referenced exhibit and filed such exhibit separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 406 promulgated under the Securities Act.

(b) Financial Statement Schedules.

All financial statement schedules are omitted because they are not applicable or the information is included in the Registrant’s consolidated financial statements or related notes.

ITEM 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to provisions described in Item 14 above, 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, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California, on October 5, 2015.

 

ADESTO TECHNOLOGIES CORPORATION
By:  

/s/ Narbeh Derhacobian

 

Narbeh Derhacobian

President and Chief Executive Officer

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the date indicated:

 

Name

  

Title

 

Date

Principal Executive Officer:

 

    

/s/ Narbeh Derhacobian

Narbeh Derhacobian

   President, Chief Executive Officer and Director   October 5, 2015

Principal Financial Officer and Principal Accounting Officer:

 

    

/s/ Ron Shelton

Ron Shelton

   Chief Financial Officer   October 5, 2015

Additional Directors:

 

    

*

Alexei Andreev

   Director   October 5, 2015

*

Nelson Chan

   Director   October 5, 2015

*

Barry Cox

  

Chairman

  October 5, 2015

*

Keith Crandell

   Director   October 5, 2015

*

Francis Lee

   Director   October 5, 2015

*

Kevin Palatnik

   Director   October 5, 2015

 

* By:   /s/ Ron Shelton
  Attorney-in-fact

 

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EXHIBIT INDEX

 

Exhibit

Number

  

Exhibit Title

  1.01**    Form of Underwriting Agreement.
  3.01    Form of Restated Certificate of Incorporation of the Registrant, to be effective immediately upon the Registrant’s reincorporation in Delaware prior to this offering.
  3.02    Form of Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of this offering.
  3.03    Bylaws of the Registrant, as currently in effect.
  3.04    Form of Amended and Restated Bylaws of the Registrant, to be effective upon closing of this offering.
  4.01*    Amended and Restated Investors’ Rights Agreement by and among the Registrant and the preferred stockholders of the Registrant dated August 19, 2013.
  5.01**    Opinion of Fenwick & West LLP regarding the legality of the securities being registered.
10.01    Form of Indemnity Agreement.
10.02*    2007 Equity Incentive Plan and form of option grant.
10.03    2015 Equity Incentive Plan and forms of equity awards.
10.04    2015 Employee Stock Purchase Plan.
10.05*    Standard Industrial/Commercial Multi-Tenant Lease by and between the Registrant and DeGuigne Ventures, LLC dated May 3, 2011.
10.06†*    Technology License Agreement, as amended, by and between the Registrant and Axon Technologies Corporation, dated January 15, 2007.
10.07†*    Manufacturing Agreement by and between the Registrant and Altis Semiconductor dated September 28, 2012.
10.08*    Amended and Restated Employment Agreement, by and between the Registrant and Narbeh Derhacobian dated August 16, 2013.
10.09*    Offer Letter, dated May 30, 2013, by and between the Registrant and Ron Shelton.
10.10*    Amended and Restated Offer of Employment, dated August 16, 2013, between the Registrant and Shane Hollmer.
10.11†*    Credit Agreement, dated April 30, 2015, among the Registrant, Artemis Acquisition LLC and Opus Bank.
10.12†*    Cell Library License Agreement by and between the Registrant and Atmel Corporation, dated September 28, 2012.
10.13†*
   Process Technology and IP License Agreement by and between the Registrant and Atmel Corporation, dated September 28, 2012.
23.01**    Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02    Consent of Burr Pilger Mayer, Inc., independent registered public accounting firm.
24.01*    Power of Attorney.

 

* Previously filed.
** To be filed by amendment.
Registrant has omitted portions of the referenced exhibit and filed such exhibit separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 406 promulgated under the Securities Act.

Exhibit 3.01

ADESTO TECHNOLOGIES CORPORATION

RESTATED CERTIFICATE OF INCORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

Adesto Technologies 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 as follows:

1. The name of this corporation is Adesto Technologies Corporation and this corporation was originally incorporated pursuant to the General Corporation Law on May 13, 2015 under the name Adesto Technologies Corporation.

2. The Board of Directors of this corporation 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 set forth on Exhibit A attached hereto and incorporated herein by this reference.

3. Exhibit A referred to above is attached hereto as Exhibit A and is hereby incorporated herein by this reference. This Restated Certificate of Incorporation 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. This 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.

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

 

By:  

 

  Narbeh Derhacobian
  President and Chief Executive Officer


EXHIBIT A

Restated Certificate of Incorporation


ADESTO TECHNOLOGIES CORPORATION

RESTATED CERTIFICATE OF INCORPORATION

ARTICLE I : NAME

The name of the corporation is Adesto Technologies Corporation. (the “ Corporation ”).

ARTICLE II : REGISTERED OFFICE

The address of the registered office of the Corporation in the State of Delaware is 3500 South Dupont Highway, City of Dover, County of Kent, DE 19901. The name of the registered agent of the Corporation at that address is Incorporation Services, Ltd.

ARTICLE III : PURPOSE

The purpose of the corporation is to engage in any lawful act or activity for which Corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE IV : AUTHORIZED STOCK

A. CLASSES OF STOCK.

The total number of shares of all classes of stock which the Corporation shall have authority to issue is Twenty Four Million Three Hundred Fifty Thousand Five Hundred Eighty Six (24,350,586) shares, consisting of two classes: Nineteen Million Six Hundred Ninety Seven Thousand (19,697,000) shares of Common Stock, $0.0001 par value per share (“ Common Stock ”) and Four Million Six Hundred Fifty Three Thousand Five Hundred Eighty Six (4,653,586) shares of Preferred Stock, $0.0001 par value per share (“ Preferred Stock ”). The Preferred Stock may be issued from time to time in one or more series, each of such series to consist of such number of shares and to have such terms, rights, powers and preferences, and the qualifications and limitations with respect thereto, as stated or expressed herein. As of the effective date of this Restated Certificate of Incorporation (this “ Restated Certificate ”), One Million Eighty Seven Thousand and Six Hundred and Sixty Three (1,087,663) shares of the authorized Preferred Stock of the Corporation are hereby designated “ Series A Preferred Stock ”, One Million Three Hundred Eleven Thousand (1,311,000) shares of the authorized Preferred Stock of the Corporation are hereby designated “ Series B Preferred Stock ,” Eight Hundred and Thirty Seven Thousand and Nine Hundred and Sixty Two (837,962) shares of the authorized Preferred Stock of the Corporation are hereby designated “ Series C Preferred Stock ”, Five Hundred and Eighteen Thousand and Three Hundred and Forty Two (518,342) shares of the authorized Preferred Stock of the Corporation are hereby designated “ Series D Preferred Stock ,” Two Hundred and Twenty Two Thousand and Eight Hundred and Sixty One (222,861) shares of the authorized Preferred Stock of the Corporation are hereby designated “ Series D-1 Preferred Stock ,” and Six Hundred and Seventy Five Thousand and Seven Hundred and Fifty Eight (675,758) shares of the authorized Preferred Stock of the Corporation are hereby designated “ Series E Preferred Stock . The following is a statement of the designations and the rights, powers and privileges, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation.


B. COMMON STOCK. The rights, preferences, privileges and restrictions granted to and imposed on the Common Stock are as set forth below in this Article IV(B).

1. General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences of the holders of Preferred Stock set forth herein and as may be designated by resolution of the Board of Directors of the Corporation with respect to any series of Preferred Stock as authorized herein.

2. Voting Rights. The holder of each share of Common Stock shall have the right to one vote for each such share, and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of this Corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. No holder of the Common Stock entitled to vote at an election for directors may cumulate votes to which such person is entitled, unless, at the time of such election, the Corporation is subject to Section 2115 of the California Corporations Code. During such time or times that the Corporation is subject to Section 2115(b) of the California Corporations Code, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder desires. No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

C. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK.

The following rights, powers and privileges, and restrictions, qualifications and limitations, shall apply to the Preferred Stock. Unless otherwise indicated, references to “Sections” in this Part C of this Article IV refer to sections of this Part C.

1. Dividend Provisions.

a. Series E Preferred Stock . The Corporation shall not declare, pay or set aside any dividends 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) in any year unless the holders of Series E Preferred Stock then outstanding shall first receive in such year a dividend on each outstanding share of Series E Preferred Stock in an amount at least equal to $1.881 per share (in each instance, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). The Board of Directors of the Corporation is under no obligation to declare dividends, no right shall accrue to the holders of Series E Preferred Stock if dividends are not declared, and any dividends declared shall not be cumulative.

 

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b. Series D-1 Preferred Stock and Series D Preferred Stock . Subject to the prior dividend rights of the Series E Preferred Stock set forth herein, the Corporation shall not declare, pay or set aside any dividends 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) in any year unless the holders of Series D-1 Preferred Stock and Series D Preferred Stock then outstanding shall first receive, on a pari passu basis, in such year a dividend (i) on each outstanding share of Series D-1 Preferred Stock in an amount at least equal to $1.881 per share (in each instance, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) and (ii) on each outstanding share of Series D Preferred Stock in an amount at least equal to $2.508 per share (in each instance, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). The Board of Directors of the Corporation is under no obligation to declare dividends, no right shall accrue to the holders of Series D-1 Preferred Stock and Series D Preferred Stock if dividends are not declared, and any dividends declared shall not be cumulative.

c. Series C Preferred Stock . Subject to the prior dividend rights of the Series E Preferred Stock, the Series D-1 Preferred Stock and the Series D Preferred Stock set forth herein, the Corporation shall not declare, pay or set aside any dividends 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) in any year unless the holders of Series C Preferred Stock then outstanding shall first receive in such year a dividend on each outstanding share of Series C Preferred Stock in an amount at least equal to $1.848 per share (in each instance, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). The Board of Directors of the Corporation is under no obligation to declare dividends, no right shall accrue to the holders of Series C Preferred Stock if dividends are not declared, and any dividends declared shall not be cumulative.

d. Series B Preferred Stock . Subject to the prior dividend rights of the Series E Preferred Stock, the Series D-1 Preferred Stock, the Series D Preferred Stock and the Series C Preferred Stock set forth herein, the Corporation shall not declare, pay or set aside any dividends 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) in any year unless the holders of Series B Preferred Stock then outstanding shall be entitled to receive a dividend when, as and if declared by the Board of Directors of the Corporation, on each outstanding share of Series B Preferred Stock in an amount at least equal to $0.97581 per share (in each instance, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). The Board of Directors of the Corporation is under no obligation to declare dividends, no right shall accrue to the holders of Series B Preferred Stock if dividends are not declared, and any dividends declared shall not be cumulative.

e. Series A Preferred Stock . Subject to the prior dividend rights of the Series E Preferred Stock, the Series D-1 Preferred Stock, the Series D Preferred Stock, the Series C Preferred Stock and the Series B Preferred Stock set forth herein, the Corporation shall not declare, pay or set aside any dividends 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

 

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Stock) in any year unless the holders of Series A Preferred Stock then outstanding shall be entitled to receive a dividend, when, as and if declared by the Board of Directors of the Corporation, on each outstanding share of Series A Preferred Stock in an amount at least equal to $0.88704 per share (in each instance, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). The Board of Directors of the Corporation is under no obligation to declare dividends, no right shall accrue to the holders of Series A Preferred Stock if dividends are not declared, and any dividends declared shall not be cumulative.

f. Participation Rights . The Corporation shall not declare, pay or set aside any dividends on shares of any class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless the holders of Preferred Stock then outstanding shall first receive, or simultaneously receive, in addition to any dividend payable pursuant to the foregoing provisions of this Section C.1, a dividend on each outstanding share of Preferred Stock in an amount at least equal to that dividend per share of Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all such shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend; provided, however, that no such adjustment shall be made for the purposes of Section C.4 below regarding the calculation of the conversion rates of the Preferred Stock.

2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales .

a. Preferential Payments to Holders of Series E Preferred Stock and Management Carve-Out Payments.

(i) In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event (as defined herein) of the Corporation, the holders of shares of Series E Preferred Stock then outstanding shall be entitled to be paid out of the assets available for distribution to its stockholders, before any payment shall be made to the holders of Series D-1 Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to $23.5125 (such amount, as adjusted from time to time in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, being hereinafter referred to as the “ Series E Original Issue Price ”) multiplied by three (3), plus any dividends declared but unpaid thereon (the “ Series E First Liquidation Preference ”). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series E Preferred Stock the full amount of the Series E First Liquidation Preference to which they shall be entitled, the holders of shares of Series E Preferred Stock shall share ratably in any distribution of the remaining 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.

 

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(ii) In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event (as defined herein) of the Corporation, after payment of the Series E First Liquidation Preference required to be paid to the holders of Series E Preferred Stock as provided above, certain service providers of the Corporation shall be entitled to be paid out of the assets available for distribution to the Corporation’s stockholders, before any payment shall be made to the holders of Series D-1 Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership thereof, an aggregate amount set forth and pursuant to the terms of a management carve-out plan then in effect and duly approved by the Board of Directors of the Corporation (the “ Management Carve-Out Payments ”).

(iii) In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event (as defined herein) of the Corporation, after payment of the Series E First Liquidation Preference and the Management Carve-Out Payments as provided above, the holders of shares of Series E Preferred Stock then outstanding shall be entitled to be paid out of the assets available for distribution to its stockholders, before any payment shall be made to the holders of Series D-1 Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership thereof, an amount equal to the Series E Original Issue Price multiplied by two (2), plus any dividends declared but unpaid thereon (the “ Series E Second Liquidation Preference ”). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series E Preferred Stock the full amount of the Series E Second Liquidation Preference to which they shall be entitled, the holders of shares of Series E Preferred Stock shall share ratably in any distribution of the remaining 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.

b. Preferential Payments to Holders of Series D-1 Preferred Stock and Series D Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event (as defined herein) of the Corporation, after payment of all preferential amounts required to be paid to the holders of Series E Preferred Stock and payment of the Management Carve-Out Payments, each as provided above, the holders of shares of Series D-1 Preferred Stock and Series D Preferred Stock then outstanding shall be entitled, on a pari passu basis , to be paid out of the assets available for distribution to its stockholders, before any payment shall be made to the holders of Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership thereof, (i) with respect to the Series D-1 Preferred Stock, an amount equal to $23.5125 per share (such amount, as adjusted from time to time in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, being hereinafter referred to as the “ Series D-1 Original Issue Price ”), plus any dividends declared but unpaid thereon, and (ii) with respect to the Series D Preferred Stock, an amount equal to $31.35 per share (such amount, as adjusted from time to time in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, being hereinafter referred to as the “ Series D Original Issue Price ”), plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets available for distribution to its stockholders shall be insufficient to pay the

 

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holders of shares of Series D-1 Preferred Stock and Series D Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series D-1 Preferred Stock and Series D Preferred Stock shall share ratably in any distribution of the remaining 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.

c. Preferential Payments to Holders of Series C Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event (as defined herein) of the Corporation, after payment of all preferential amounts required to be paid to the holders of Series E Preferred Stock, payment of the Management Carve-Out Payments, and all preferential payments required to be paid to the holders of Series D-1 Preferred Stock and Series D Preferred Stock, each as provided above, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the assets available for distribution to its stockholders, before any payment shall be made to the holders of Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership thereof, an amount equal to $23.1 per share (such amount, as adjusted from time to time in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, being hereinafter referred to as the “ Series C Original Issue Price ”), plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series C Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series C Preferred Stock shall share ratably in any distribution of the remaining 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.

d. Preferential Payments to Holders of Series B Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event (as defined herein) of the Corporation, after payment of all preferential amounts required to be paid to the holders of Series E Preferred Stock, payment of the Management Carve-Out Payments, and all preferential payments required to be paid to the holders of Series D-1 Preferred Stock, Series D Preferred Stock and Series C Preferred Stock, each as provided above, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets available for distribution to its stockholders, before any payment shall be made to the holders of Series A Preferred Stock or Common Stock by reason of their ownership thereof, an amount equal to $12.1968 per share (such amount, as adjusted from time to time in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, being hereinafter referred to as the “ Series B Original Issue Price ”), plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the remaining 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.

 

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e. Preferential Payments to Holders of Series A Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event of the Corporation, after payment of all preferential amounts required to be paid to the holders of Series E Preferred Stock, payment of the Management Carve-Out Payments, and all preferential payments required to be paid to the holders of Series D-1 Preferred Stock, Series D Preferred Stock, Series C Preferred Stock and Series B Preferred Stock, each as provided above, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount equal to $11.088 per share (such amount, as adjusted from time to time in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, being hereinafter referred to as the “ Series A Original Issue Price ”), plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the remaining 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.

f. Distribution of Remaining Assets . After the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock and payment of the Management Carve-Out Payments, each as provided above, the remaining assets available for distribution to the Corporation’s stockholders shall be distributed among the holders of the shares of Preferred Stock and Common Stock, pro rata based on the number of shares of Common Stock held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock pursuant to the terms of the Certificate of Incorporation in effect immediately prior to such dissolution, liquidation or winding up of the Corporation.

g. Deemed Liquidation Events .

(i) The following events shall be deemed to be a liquidation of the Corporation for purposes of this Section C.2 (a “ Deemed Liquidation Event ”), unless the holders of at least two-thirds of the then outstanding shares of Preferred Stock, on an as-converted to Common Stock basis, elect otherwise by vote or written consent at least five (5) days prior to the effective date of any such event:

(1) a merger or consolidation in which

(A) the Corporation is a constituent party; or

(B) 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 or exchanged for shares of capital stock

 

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which 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;

(2) a transaction to which the Corporation is a party and pursuant to which any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than a trustee or other fiduciary holding securities of the Corporation under an employee benefit plan of the Corporation, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Corporation representing more than 50% of the combined voting power of the Corporation’s then-outstanding securities, excluding, for purposes of this subsection (B), any transaction constituting an equity financing in which the Corporation is the surviving corporation; or

(3) the sale, lease, transfer or other disposition (including by way of an exclusive license), 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, except where such sale, lease, transfer or other disposition is to a wholly owned subsidiary of the Corporation.

(ii) The Corporation shall not have the power to effect any transaction constituting a Deemed Liquidation Event pursuant to Subsection C.2(g)(i)(1)(B) above unless the agreement or plan of merger or consolidation 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 C.2(a)-(e) above.

(iii) In the event of a Deemed Liquidation Event pursuant to Subsection C.2(g)(i)(1)(B)or C.2(g)(i)(2) above, if the dissolution of the Corporation shall not have been approved by the Board of Directors and the stockholders of the Corporation within sixty (60) days after such Deemed Liquidation Event, then (A) the Corporation shall deliver a written notice to each holder of Preferred Stock no later than the sixtieth (60th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (B) to require the redemption of such shares of Preferred Stock, and (B) if the Corporation receives from the holders of at least two-thirds of the then outstanding shares of Preferred Stock, on an as-converted to Common Stock basis, not later than seventy-five (75) days after such Deemed Liquidation Event, the vote or written consent approving the redemption of all shares of Preferred Stock, 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 of Directors of the Corporation) (the “ Net Proceeds ”) to redeem, to the extent legally available therefor, on the ninetieth (90th) day after such Deemed Liquidation Event (the “ Liquidation Redemption Date ”), all outstanding shares of Preferred Stock at a price per share equal to the amount otherwise to be paid and distributed, as applicable, respecting those shares pursuant to Subsections C.2(a)-(f) above. In the event of a redemption pursuant to the preceding sentence, if the Net Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, or if the Corporation does not have sufficient lawfully available funds to effect such redemption, the Corporation shall redeem, in accordance with Subsections C.2(a)-(e) above,

 

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that portion of each holder’s shares of Preferred Stock to the fullest extent of such Net Proceeds or such lawfully available funds, as the case may be, and, where such redemption is limited by the amount of lawfully available funds, the Corporation shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor, in accordance with Subsections C.2(a)-(e) above. Prior to the distribution or redemption provided for in this Subsection C.2(f)(iii), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in the ordinary course of business and pre-existing liabilities and debt.

(iv) The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any Deemed Liquidation Event shall be the cash 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. Any such property, rights or securities shall be valued as follows:

(1) Securities not subject to investment letter or other similar restrictions on free marketability covered by (2) below:

(A) If traded on a securities exchange or through the Nasdaq Global Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the twenty (20) trading day period ending three (3) trading days prior to the closing of the Deemed Liquidation Event;

(B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the twenty (20) trading day period ending three (3) trading days prior to the closing of the Deemed Liquidation Event; and

(C) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Corporation and the holders of at least two-thirds of the voting power of all then outstanding shares of Preferred Stock.

(2) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (1) (A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined by the Corporation and the holders of at least two-thirds of the voting power of all then outstanding shares of such Preferred Stock.

(3) The value of any property or rights other than securities shall be determined in good faith by the Board of Directors of the Corporation.

(4) The foregoing methods for valuing non-cash consideration to be distributed in connection with a Deemed Liquidation Event shall, upon approval by the stockholders of the Corporation of the definitive agreements governing a

 

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Deemed Liquidation Event, be superseded by any determination of such value set forth in the definitive agreements governing such Deemed Liquidation Event.

3. Voting .

a. 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 a 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 provisions of Subsection C.3(b) or C.3(c) below, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class.

b. The Board of Directors shall consist of eight (8) directors. (i) The holders of record of shares of Preferred Stock, exclusively and as a separate class, shall be entitled to elect five (5) directors of the Corporation (the “ Preferred Directors ”); (ii) the holders of record of shares of Common Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation; and (iii) the holders of record of the shares of Preferred Stock and Common Stock, voting together as a single class (with cumulative voting rights as among themselves), shall be entitled to elect the remaining directors of the Corporation. The rights of cumulative voting set forth in Subsection B.2 shall apply to the election of directors pursuant to this Subsection C.3(b).

c. 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(es) or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. With respect to the election of any director or directors by the holders of the outstanding shares of a specified series, class or classes of stock given the right to elect such director or directors pursuant to Subsection C.3(b) above (the “ Specified Stock ”), that candidate or those candidates (as applicable) shall be elected who either: (i) in the case of any such vote conducted at a meeting of the holders of such Specified Stock, receive the highest number of affirmative votes (on an as-converted to Common Stock basis) of the outstanding shares of such Specified Stock, up to the number of directors to be elected by such Specified Stock or (ii) in the case of any such vote taken by unanimous written consent without a meeting, are elected by the unanimous written consent of the holders of outstanding shares of such Specified Stock; provided, however, that if such vote is to fill a vacancy on the Board of Directors of the Corporation other than a vacancy created by removal of a director, such vacancy may be filled by election by the written consent of the holders of a majority (on an as-converted to Common Stock basis) of the outstanding shares of such Specified Stock entitled to vote.

d. If there shall be any vacancy in the office of a director elected or to be elected by the holders of any Specified Stock, then a director to hold office for the unexpired term of such directorship may be elected by the required vote of holders of the shares of such Specified Stock specified in Subsection C.3(c) above that are entitled to elect such director. Any director who shall have been elected to the Board of Directors of the Corporation by the holders of any Specified Stock may be removed during his or her term of office, without cause, by, and only by, the affirmative vote, on an as-converted to Common Stock basis, of a majority of

 

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Specified Stock given either at a meeting of such shareholders duly called for that purpose or pursuant to a written consent of shareholders without a meeting, provided that, no such director may be removed (unless the entire Board of Directors is removed) when the votes cast against removal, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively at an election at which the same total number of votes were cast (or, if the action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of the director’s most recent election were then being elected. Any vacancy created by such removal may be filled only in the manner provided in Subsection C.3(c) above.

e. The rights of the holders of Preferred Stock and the rights of the holders of Common Stock under Subsection C.3(b) shall terminate on the first date on which there are issued and outstanding less than three hundred and three thousand and thirty (303,030) shares of Preferred Stock (subject to appropriate adjustment in the event of any dividend, stock split, combination or other similar recapitalization affecting such shares).

f. At any time when at least an aggregate of three hundred and three thousand and thirty (303,030) shares of Preferred Stock (subject to appropriate adjustment in the event of any dividend, stock split, combination or other similar recapitalization affecting such shares) are outstanding, except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by law or this Restated Certificate, and in addition to any other vote required by law or this Restated Certificate, without the written consent or affirmative vote of the holders of at least two-thirds (2/3rds) of the then outstanding shares of Preferred Stock, consenting or voting together on an as-converted to Common Stock basis, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, the Corporation shall not, either directly or by amendment, merger, consolidation or otherwise:

(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;

(ii) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation;

(iii) create any additional class or series of shares of stock having rights, preferences or privileges senior to, or on parity with, the Series E Preferred Stock, the Series D-1 Preferred Stock, the Series D Preferred Stock, the Series C Preferred Stock, the Series B Preferred Stock or the Series A Preferred Stock, or increase the authorized number of shares of Preferred Stock or increase the authorized number of shares of any additional class or series of shares of stock having rights, preferences or privileges senior to, or on parity with, the Series E Preferred Stock, the Series D-1 Preferred Stock, the Series D Preferred Stock, the Series C Preferred Stock, the Series B Preferred Stock or the Series A Preferred Stock, or create or authorize any obligation or security convertible into shares of any class or series of stock having rights, preferences or privileges senior to, or on parity with, the Series E Preferred Stock, the Series D-1 Preferred Stock, the Series D Preferred Stock, the Series C Preferred Stock, the Series B Preferred Stock or the Series A Preferred Stock;

 

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(iv) purchase or redeem, or pay or declare any dividend or make any distribution on, any shares of stock other than the Preferred Stock as expressly authorized herein, or permit any subsidiary of the Corporation to take any such action, except for dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and other than securities repurchased 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 lower of fair market value of the original purchase price thereof;

(v) increase or decrease the authorized number of directors constituting the Board of Directors of the Corporation; or

(vi) create or authorize the creation of any debt security unless approved by a majority of the Directors.

g. At any time when at least an aggregate of ninety thousand and nine hundred and nine (90,909) shares of Series E Preferred Stock (subject to appropriate adjustment in the event of any dividend, stock split, combination or other similar recapitalization affecting such shares) are outstanding, except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by law or this Restated Certificate, and in addition to any other vote required by law or this Restated Certificate, without the written consent or affirmative vote of the holders of at least ninety percent (90%) of the then outstanding shares of Series E Preferred Stock, consenting or voting together on an as-converted to Common Stock basis, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, the Corporation shall not, either directly or by amendment, merger, consolidation or otherwise, amend, alter or repeal any of the rights, preferences or privileges of the Series E Preferred Stock set forth in this Restated Certificate.

h. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide or a stockholder demands election by ballot at a meeting before the voting begins.

4. Optional Conversion. The holders of the Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):

a. Right to Convert. 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 by, with respect to the Series E Preferred Stock, dividing the Series E Original Issue Price by the Conversion Price (as defined below) for the Series E Preferred Stock in effect at the time of conversion, with respect to the Series D-1 Preferred Stock, dividing the Series D-1 Original Issue Price by the Conversion Price (as defined below) for the Series D-1 Preferred Stock in effect at the time of conversion, with respect to the Series D Preferred Stock, dividing the Series D Original Issue Price by the Conversion Price (as defined below) for the Series D Preferred Stock in effect at the time of conversion, with respect to the Series C Preferred Stock, dividing the Series C Original Issue Price by the Conversion Price (as defined below) for the Series C Preferred Stock in effect at the time of conversion, with respect to the Series B Preferred Stock, dividing the Series B Original

 

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Issue Price by the Conversion Price (as defined below) for the Series B Preferred Stock in effect at the time of conversion, and with respect to the Series A Preferred Stock, dividing the Series A Original Issue Price by the Conversion Price (as defined below) for the Series A Preferred Stock in effect at the time of conversion. The “ Conversion Price ” for the Series E Preferred Stock shall be equal to $23.5125, for the Series D-1 Preferred Stock shall be equal to $23.5125, for the Series D Preferred Stock shall be equal to $30.3468, for the Series C Preferred Stock shall be equal to $23.1, for the Series B Preferred Stock shall be equal to $12.1968 and for the Series A Preferred Stock shall be equal to $11.088. The initial Conversion Price for each series of Preferred Stock, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

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.

b. 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 of Directors of the Corporation. 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.

c. Mechanics of Conversion.

(i) 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 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 of such certificates (or lost certificate affidavit and agreement) and notice (or by the Corporation if the Corporation serves as its own transfer agent) 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, issue and deliver at such office to such holder of

 

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Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share.

(ii) The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of 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 this Restated Certificate.

(iii) 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, including the rights, if any, to receive notices and to vote, 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 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and shall not be reissued as shares of such series, and the Corporation (without the need for stockholder action) may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

(iv) Upon any such conversion, no adjustment to the Conversion Price of any series of Preferred Stock shall be made for any declared but unpaid dividends on such series of Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

(v) 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 C.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.

d. Adjustments to Conversion Price for Diluting Issues .

(i) Special Definitions . For purposes of this Section C.4, the following definitions shall apply:

(1) “ Option ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

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(2) “ 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.

(3) “ Additional Shares of Common Stock ” shall mean all shares of Common Stock issued (or, pursuant to Subsection C.4(d)(iii) below, deemed to be issued) by the Corporation after the date on which the first share of Series D Preferred Stock is issued by the Corporation (the “ Series D Original Issue Date ”), other than the following (“ Exempted Securities ”):

(A) shares of Common Stock issued or deemed issued as a dividend or distribution on the Preferred Stock;

(B) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection C.4(e) or C.4(f) below;

(C) shares of Common Stock issued or deemed issued to officers, employees or directors of, or consultants to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation;

(D) 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;

(E) shares of Common Stock or Preferred Stock issued or issuable in connection with strategic alliances or commercial relationships approved by the Board of Directors of the Corporation;

(F) shares of Common Stock issued or issuable to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation;

(G) shares of Common Stock issued or issuable pursuant to a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, in which gross proceeds received by the Corporation shall be at least $30,000,000 (a “ Qualifying Public Offering ”);

(H) shares of Common Stock or Preferred Stock issued or issuable pursuant to the acquisition of another corporation by the Corporation by merger, purchase of all or substantially all of the assets or other reorganization or pursuant to a joint venture agreement, provided, that such issuances are approved by the Board of Directors of the Corporation;

(I) shares of Series A Preferred Stock, and the Common Stock issuable upon conversion of such Series A Preferred Stock, issuable upon the

 

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exercise of the warrant issued to ATEL Ventures, Inc. to purchase up to an aggregate of 5,411 shares of Series A Preferred Stock (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares);

(J) shares of Series B Preferred Stock, and the Common Stock issuable upon conversion of such Series B Preferred Stock, issuable upon the exercise of the warrant issued to ATEL Ventures, Inc. to purchase up to an aggregate of 7,378 shares of Series B Preferred Stock (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares);

(K) shares of Series C Preferred Stock, and the Common Stock issuable upon conversion of such Series C Preferred Stock, issuable upon the exercise of the warrant issued to Altis Semiconductor to purchase up to an aggregate of 86,580 shares of Series C Preferred Stock (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares);

(L) shares of Common Stock or rights or warrants to purchase shares of Common Stock and the Common Stock issuable upon exercise of such rights or warrants issued or issuable to Axon Technologies Corporation pursuant to the terms of that certain Technology License Agreement by and between the Corporation and Axon Technologies Corporation dated as of January 15, 2007, as such may be amended from time to time;

(M) shares of Series E Preferred Stock and the Common Stock issuable upon conversion of such shares of Series E Preferred Stock; and

(N) any shares of Common Stock issued or issuable upon any conversion of the Preferred Stock.

(ii) No Adjustment of Conversion Price . No adjustment in the Conversion Price of a series of Preferred Stock shall be made as the result of the issuance of Additional Shares of Common Stock if: (a) the consideration per share (determined pursuant to Subsection C.4(d)(v)) for such Additional Shares of Common Stock issued or deemed to be issued by the Corporation is equal to or greater than the applicable Conversion Price of such series of Preferred Stock in effect immediately prior to the issuance or deemed issuance of such Additional Shares of Common Stock, or (b) prior to such issuance or deemed issuance, the Corporation receives the vote or written consent from the holders of at least two-thirds of the then outstanding shares of such series of Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

(iii) Deemed Issue of Additional Shares of Common Stock .

(1) If the Corporation at any time or from time to time after the Series D Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which, upon exercise, conversion or exchange thereof, would entitle the holder thereof to receive Exempted Securities pursuant to Subsection C.4(d)(i)(3)) or shall fix a record date for the determination of holders of any class of securities

 

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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 of Convertible Securities, 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.

(2) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection C.4(d)(iv) below, are revised (either automatically pursuant to the provisions contained therein or as a result of an amendment to such terms) to provide for either (1) any increase or decrease 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 increase or decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock 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 Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no adjustment pursuant to this clause (B) shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price of such series of Preferred Stock on the original adjustment date, or (ii) the Conversion Price of such series of Preferred Stock that would have resulted from any issuances of Additional Shares of Common Stock between the original adjustment date and such readjustment date.

(3) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which, upon exercise, conversion or exchange thereof, would entitle the holder thereof to receive Exempted Securities pursuant to Subsection C.4(d)(i)(3)), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection C.4(d)(iv) below (either because the consideration per share (determined pursuant to Subsection C.4(d)(v) hereof) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price of such series of Preferred Stock then in effect, or because such Option or Convertible Security was issued before the Series D Original Issue Date), are revised after the Series D Original Issue Date (either automatically pursuant to the provisions contained therein or as a result of an amendment to such terms) 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, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection C.4(d)(iii)(A) above) shall be deemed to have been issued effective upon such increase or decrease becoming effective. If the change in such Option or Convertible Security causes an adjustment pursuant to this provision and such Option or Convertible Security is then further changed as a result of the adjustments made pursuant to this provision, no further

 

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adjustment shall be made hereunder as a result of the further automatic change in such Option or Convertible Security.

(4) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection C.4(d)(iv) below, the Conversion Price of such series of Preferred Stock shall be readjusted to the Conversion Price of such series of Preferred Stock as would have been obtained had such Option or Convertible Security never been issued.

(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock . In the event the Corporation shall at any time after the Series D Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection C.4(d)(iii)), without consideration or for a consideration per share less than the applicable Conversion Price of a series of Preferred Stock in effect immediately prior to such issue, then, in each such case, the Conversion Price for such series of Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

CP2 = CP1 * (A + B) ÷ (A + C)

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

(1) CP2 shall mean the Conversion Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock

(2) CP1 shall mean the Conversion Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;

(3) “A” shall mean the number of shares of Common Stock outstanding and deemed 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 of Convertible Securities (including the Preferred Stock) outstanding immediately prior to such issue);

(4) “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

(5) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

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(v) Determination of Consideration . For purposes of this Subsection C.4(d), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

(1) Cash and Property . Such consideration shall:

(A) 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;

(B) 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 of Directors of the Corporation; and

(C) 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 (A) and (B) above, as determined in good faith by the Board of Directors of the Corporation.

(2) 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 C.4(d)(iii), relating to Options and Convertible Securities, shall be determined by dividing:

(A) 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

(B) 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.

(vi) Multiple Closing Dates . In the event the Corporation shall issue on more than one (1) date Additional Shares of Common Stock that are a part of one (1) transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection C.4(d)(iv) above, and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without additional giving effect to any adjustments as a result of any subsequent issuances within such period).

 

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e. Adjustment for Stock Splits and Combinations . If the Corporation shall at any time or from time to time after the Series D Original Issue Date effect a subdivision of the outstanding Common Stock without a comparable subdivision of a series of Preferred Stock or combine the outstanding shares of a series of Preferred Stock without a comparable combination of the Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before that subdivision or combination shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series 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 D Original Issue Date combine the outstanding shares of Common Stock without a comparable combination of a series of Preferred Stock or effect a subdivision of the outstanding shares of a series of Preferred Stock without a comparable subdivision of the Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before the combination or subdivision shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection C.4(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

f. Adjustment for Certain Dividends and Distributions . In the event the Corporation at any time or from time to time after the Series D 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 Conversion Price of each series of Preferred Stock 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 the Conversion Price of each such series of Preferred Stock then in effect by a fraction:

(i) 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

(ii) the denominator 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 plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

provided , however , that 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 Conversion Price of each series of Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price of each series of Preferred Stock shall be adjusted pursuant to this Subsection C.4(f) as of the time of actual payment of such dividends or distributions; and provided further , however, that no such adjustment shall be made to the Conversion Price of a series of Preferred Stock if the holders of such series of Preferred Stock simultaneously receive (i) 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 such series of Preferred Stock had been converted into Common Stock on

 

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the date of such event or (ii) a dividend or other distribution of shares of such series of Preferred Stock which are convertible, as of the date of such event, into such number of shares of Common Stock as is equal to the number of additional shares of Common Stock being issued with respect to each share of Common Stock in such dividend or distribution.

g. Adjustments for Other Dividends and Distributions . In the event the Corporation at any time or from time to time after the Series D Original Issue Date shall make or issue, or fix a record date for the determination of holders of capital stock of the Corporation 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 C.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 such capital 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.

h. Adjustment for Merger or Reorganization, etc. Subject to the provisions of Subsection C.2(e), 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 (e), (f) or (g) of this Section C.4), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of a series of 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 (1) share of such series Preferred Stock immediately prior to such reorganization, recapitalization, 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 of Directors of the Corporation) shall be made in the application of the provisions in this Section C.4 with respect to the rights and interests thereafter of the holders of such series of Preferred Stock, to the end that the provisions set forth in this Section C.4 (including provisions with respect to changes in and other adjustments of the Conversion Price of such series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of such series of Preferred Stock.

i. Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price of a series of Preferred Stock pursuant to this Section C.4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such series of 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 any series of Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the

 

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Conversion Price of such series of Preferred Stock 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 such series of Preferred Stock.

j. Notice of Record Date . In the event:

(i) the Corporation shall take a record of the holders of its Common Stock (or other 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 stock of any class or any other securities, or to receive any other right; or

(ii) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

(iii) 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 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, 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 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 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 each series of Preferred Stock and the Common Stock. Such notice shall be sent at least five (5) days prior to the record date or effective date for the event specified in such notice. Any notice required by the provisions hereof to be given to a holder of shares of Preferred Stock shall be deemed sent to such holder if deposited in the United States mail, postage prepaid, and addressed to such holder at his, her or its address appearing on the books of the Corporation. Any notice required to be sent to the holders of a series of Preferred Stock pursuant to this Subsection C.4(j) may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of at least two-thirds of the then outstanding shares of such series of Preferred Stock. Any such waiver shall bind all future holders of shares of such series of Preferred Stock.

5. Mandatory Conversion .

a. Upon the consummation of a Qualifying Public Offering (the “ QPO Conversion Date ”), (i) all outstanding shares of Series D-1 Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock and Series A Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate of each such respective series of Preferred Stock, (ii) each outstanding share of Series E Preferred Stock shall automatically be converted into 9.8841 shares of Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other

 

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similar recapitalization affecting the shares of Series E Preferred Stock) and (iii) such shares may not be reissued by the Corporation as shares of such series.

b. Upon the date specified by vote or written consent of the holders of at least ninety percent (90%) of the then outstanding shares of Series E Preferred Stock, on an as-converted to Common Stock basis (the “ Series E Conversion Date ”), (i) all outstanding shares of Series E Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate of Series E Preferred Stock and (ii) such shares may not be reissued by the Corporation as shares of such series.

c. Upon the date specified by vote or written consent of the holders of at least two-thirds (2/3rds) of the then outstanding shares of Series D-1 Preferred Stock, on an as-converted to Common Stock basis (the “ Series D-1 Conversion Date ”), (i) all outstanding shares of Series D-1 Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate of Series D-1 Preferred Stock and (ii) such shares may not be reissued by the Corporation as shares of such series.

d. Upon the date specified by vote or written consent of the holders of at least two-thirds (2/3rds) of the then outstanding shares of Series D Preferred Stock, on an as-converted to Common Stock basis (the “ Series D Conversion Date ”), (i) all outstanding shares of Series D Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate of Series D Preferred Stock and (ii) such shares may not be reissued by the Corporation as shares of such series.

e. Upon the date specified by vote or written consent of the holders of at least two-thirds (2/3rds) of the then outstanding shares of Series C Preferred Stock, on an as-converted to Common Stock basis (the “ Series C Conversion Date ”), (i) all outstanding shares of Series C Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate of Series C Preferred Stock and (ii) such shares may not be reissued by the Corporation as shares of such series.

f. Upon the date specified by vote or written consent of the holders of at least two-thirds (2/3rds) of the then outstanding shares of Series B Preferred Stock, on an as-converted to Common Stock basis (the “ Series B Conversion Date ”), (i) all outstanding shares of Series B Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate of Series B Preferred Stock and (ii) such shares may not be reissued by the Corporation as shares of such series.

g. Upon the date specified by vote or written consent of the holders of at least two-thirds (2/3rds) of the then outstanding shares of Series A Preferred Stock, on an as-converted to Common Stock basis (the “ Series A Conversion Date ”), (i) all outstanding shares of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion rate of Series A Preferred Stock and (ii) such shares may not be reissued by the Corporation as shares of such series. Each of the QPO Conversion Date, the Series E Conversion Date, the Series D-1 Conversion Date, the Series D Conversion Date, the Series C Conversion Date, the Series B Conversion Date and the Series A Conversion Date is referred to herein as a “Mandatory Conversion Date”.

 

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h. Holders of record of shares of Preferred Stock subject to mandatory conversion pursuant to this Section C.5 shall be given written notice of the applicable Mandatory Conversion Date and the place designated for mandatory conversion of all such shares of Preferred Stock. Such notice need not be given in advance of the occurrence of such Mandatory Conversion Date. Such notice shall be sent by first class or registered mail, postage prepaid, or given by electronic communication in compliance with the provisions of the Delaware General Corporation Law, to each record holder of such shares of Preferred Stock. Upon receipt of such notice, each holder of such shares of Preferred Stock shall surrender his, her or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section C.5. On a Mandatory Conversion Date, all outstanding shares of Preferred Stock subject to mandatory conversion on such Mandatory Conversion Date shall be deemed to have been converted into shares of Common Stock, which shall be deemed to be outstanding of record, and all rights with respect to the such Preferred Stock so converted, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Common Stock into which such shares of Preferred Stock have been converted, and payment of any declared but unpaid dividends thereon. 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. As soon as practicable after a Mandatory Conversion Date and the surrender of the certificate or certificates for shares of Preferred Stock, the Corporation shall cause to be issued and delivered to such holder, or on his, her or its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and cash as provided in Subsection C.4(b) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion.

i. All certificates evidencing shares of Preferred Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after an applicable Mandatory Conversion Date, be deemed to have been retired and cancelled, and the shares of Preferred Stock represented thereby converted into Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. Such converted shares of each series of Preferred Stock may not be reissued as shares of such series of Preferred Stock, 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. Redemption . Other than pursuant to Subsection C.2(g)(iii), the Preferred Stock shall not be redeemable by the Corporation.

7. Miscellaneous .

a. Waiver . Any of the rights, powers or preferences of the holders of any series of Preferred Stock set forth herein may be waived by the affirmative consent or vote of the holders of at least two-thirds of the shares of such series of Preferred Stock then outstanding.

 

24


b. Preemptive Rights . No stockholder of the Corporation shall have a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and a stockholder.

c. Corporate Distributions . For purposes of Section 500 of the California Corporations Code (to the extent Section 2115 of the California Corporation Code is applicable to the Corporation), the Corporation may make a distribution without regard to any preferential dividends arrears amount and without regard to any preferential rights.

ARTICLE V

No stockholder of the Corporation shall have a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and any stockholder.

ARTICLE VI : BYLAW PROVISIONS .

A. AMENDMENT OF BYLAWS. Subject to any additional vote required by the Restated Certificate 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.

B. NUMBER OF DIRECTORS. Subject to any additional vote required by the Restated Certificate, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

C. BALLOT. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

D. MEETINGS AND BOOKS. 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.

ARTICLE VII : DIRECTOR LIABILITY .

A. LIMITATION. 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 VII 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 VII 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.

 

25


B. INDEMNIFICATION . 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 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.

C. MODIFICATION . Any amendment, repeal or modification of the foregoing provisions of this Article VII 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.

ARTICLE VIII : CREDITOR AND STOCKHOLDER COMPROMISES

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of §291 of Title 8 of the General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under §279 of Title 8 of the General Corporation Law order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

*    *    *    *    *

 

26

Exhibit 3.02

ADESTO TECHNOLOGIES CORPORATION

RESTATED CERTIFICATE OF INCORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

Adesto Technologies Corporation, a Delaware corporation, hereby certifies that:

1. The name of this corporation is Adesto Technologies Corporation. The date of filing its original Certificate of Incorporation with the Secretary of State was on May 13, 2015.

2. The Restated Certificate of Incorporation of this corporation attached hereto as Exhibit “A” , which is incorporated herein by this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation as previously amended or supplemented, has been duly adopted by this corporation’s Board of Directors, and by this corporation’s stockholders in accordance with Sections 242 and 245 of the Delaware General Corporation Law, with the approval of this corporation’s stockholders having been given by written consent without a meeting in accordance with Section 228 of the Delaware General Corporation Law.

IN WITNESS WHEREOF , said corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer and the foregoing facts stated herein are true and correct.

 

Date:                     , 2015     Adesto Technologies Corporation
    By:  

 

    Name:   Narbeh Derhacobian
    Title:   President & Chief Executive Officer


EXHIBIT A

RESTATED CERTIFICATE OF INCORPORATION

OF

ADESTO TECHNOLOGIES CORPORATION

ARTICLE I: NAME

The name of the corporation is Adesto Technologies Corporation (the “ Corporation ”).

ARTICLE II: AGENT FOR SERVICE OF PROCESS

The address of the registered office of the Corporation in the State of Delaware is 3500 South Dupont Highway, City of Dover, County of Kent, Delaware 19901. The name of the registered agent of the Corporation at that address is Incorporating Services Ltd.

ARTICLE III: PURPOSE

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

ARTICLE IV: AUTHORIZED STOCK

1. Authorized Stock . The total number of shares of all classes of stock which the Corporation has authority to issue is One Hundred Five Million (105,000,000) shares, consisting of two classes: One Hundred Million (100,000,000) shares of Common Stock, $0.0001 par value per share (“ Common Stock ”), and Five Million (5,000,000) shares of Preferred Stock, $0.0001 par value per share (“ Preferred Stock ”).

2. Designation of Additional Series .

2.1 The Board of Directors of the Corporation (the “ Board ”) is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a Certificate of Designation pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers, preferences and relative, participating, optional or other rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase (but not above the total number of authorized shares of the class) or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding). The number of authorized shares of Preferred Stock may also 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 voting power of all the then outstanding shares of capital stock of the Corporation entitled to vote, without a vote of the holders of the Preferred Stock, unless a vote of any other holders is required pursuant to a Certificate of Designation establishing a series of Preferred Stock.

2.2 Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof,


and any such new series may have powers, preferences and rights, including, without limitation, voting rights, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock, or any future class or series of Preferred Stock or Common Stock.

3. Voting Power of Common Stock . Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided , however , that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) 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 as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock).

ARTICLE V: AMENDMENT OF BYLAWS

The Board shall have the power to adopt, amend or repeal the Bylaws of the Corporation (the “ Bylaws ”). Any adoption, amendment or repeal of the Bylaws by the Board shall require the approval of a majority of the Whole Board. For purposes of this Certificate of Incorporation, the term “ Whole Board ” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided , however , that in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to any Certificate of Designation), the affirmative vote of the holders of at least two-thirds of the voting power of all of the then outstanding 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 adopt, amend or repeal any provision of the Bylaws; provided further, that if two-thirds of the Whole Board has approved such adoption, amendment or repeal of any provisions of the Bylaws, then only the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding 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 adopt, amend or repeal any provision of the Bylaws.

ARTICLE VI: MATTERS RELATING TO THE BOARD OF DIRECTORS

1. Director Powers . The conduct of the affairs of the Corporation shall be managed by or under the direction of the Board. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

2. Number of Directors . Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board.

3. Classified Board . Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II and Class III, respectively (the “ Classified Board ”). The Board may assign members of the Board already in office to the Classified Board, which assignments shall become effective at the same time the Classified Board becomes effective. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board, with the number of directors in each class to be divided as nearly equal as

 

2


reasonably possible. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the closing of the Corporation’s initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the “ Initial Public Offering Closing ”), the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the Initial Public Offering Closing, and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the Initial Public Offering Closing. At each annual meeting of stockholders commencing with the first annual meeting of stockholders following the Initial Public Offering Closing, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Notwithstanding anything to the contrary in the foregoing provisions of this Article VI, Section 3, each director shall hold office until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal. In the event of any increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the three classes of directors so as to ensure that no one class has more than one director more than any other class.

4. Term and Removal . Each director shall hold office until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal. Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission permitted by the Bylaws. Subject to the rights of the holders of any series of Preferred Stock to remove directors elected by such holders, no director may be removed from the Board except for cause by the affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares of capital stock of the Corporation then entitled to vote at an election of directors voting together as a single class. In the event of any increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

5. Vacancies . Subject to the rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and not by the stockholders. Any director elected in accordance with the preceding sentence shall, if elected to fill a vacancy not created by a newly created directorship, be elected to a class of directors in which such vacancy exists and hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class of directors to which the director has been assigned expires or until such director shall have been duly elected and qualified or until such director’s earlier death, resignation or removal. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

 

3


ARTICLE VII: MATTERS RELATING TO THE STOCKHOLDERS

1. Written Ballot Not Required . Election of directors need not be by written ballot unless the Bylaws shall so provide.

2. No Action by Written Consent of the Stockholders . Subject to the rights of any series of Preferred Stock, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders called in accordance with this Certificate of Incorporation and the Bylaws, and no action shall be taken by the stockholders by written consent.

3. Special Meetings of Stockholders . Special meetings of stockholders for any purpose or purposes may be called only by the Chairperson of the Board, the Chief Executive Officer, the President, the Lead Independent Director (as defined in the Bylaws) or the Board acting pursuant to a resolution adopted by a majority of the Whole Board.

4.  Nominations and Business Transacted at Meetings . Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws. Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of the meeting.

5. Business Combinations . The Corporation elects to be governed by Section 203 of the DGCL.

ARTICLE VIII: DIRECTOR LIABILITY

1. Limitation of Liability . To the fullest extent permitted by law, no director of the Corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the DGCL is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

2. Change in Rights . Neither any amendment nor repeal of this Article VIII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VIII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.

ARTICLE IX: FORUM

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL or the Corporation’s Certificate of Incorporation or Bylaws, (4) any action to interpret, apply, enforce or determine the validity of the Corporation’s Certificate of Incorporation or Bylaws, or (5) any action asserting a claim governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation will be deemed to have notice of and consented to the provisions of this ARTICLE IX.

 

4


ARTICLE X: AMENDMENT OF CERTIFICATE OF INCORPORATION

If any provision of this Certificate of Incorporation becomes or is declared on any ground by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Certificate of Incorporation, and the court will replace such illegal, void or unenforceable provision of this Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Certificate of Incorporation shall be enforceable in accordance with its terms.

The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided , however , that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Certificate of Incorporation, and subject to Section 2.1 of Article IV, the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding 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 or repeal this Article X, Section 2 of Article IV, Article V, Article VI, Article VII, or Article IX of this Certificate of Incorporation; provided, further, that if two-thirds of the Whole Board has approved such amendment or repeal of any provisions of this Certificate of Incorporation, then only the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding 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 or repeal any provision of this Certificate of Incorporation.

*    *    *    *    *

 

5

Exhibit 3.03

AMENDED AND RESTATED

BYLAWS

OF

ADESTO TECHNOLOGIES CORPORATION

A Delaware corporation

As Adopted on September 28, 2015


TABLE OF CONTENTS

 

             Page(s)  
ARTICLE 1 OFFICES      1   
 

1.1

  Principal Offices      1   
 

1.2

  Other Offices      1   
ARTICLE 2 STOCKHOLDERS      1   
 

2.1

  Place of Meetings      1   
 

2.2

  Annual Meetings      1   
 

2.3

  Special Meetings      1   
 

2.4

  Notice of Meetings      2   
 

2.5

  Quorum.      2   
 

2.6

  Adjourned Meeting; Notice      2   
 

2.7

  Organization      3   
 

2.8

  Voting      3   
 

2.9

  Action by Written Consent Of Stockholders      3   
 

2.10

  Record Date for Stockholder Notice, Voting, and Giving Consents      5   
 

2.11

  List of Stockholders Entitled to Vote      5   
 

2.12

  Inspectors of Election      5   
ARTICLE 3 DIRECTORS      7   
 

3.1

  Number and Qualification of Directors      7   
 

3.2

  Election and Term of Office of Directors      7   
 

3.3

  Resignation and Vacancies      7   
 

3.4

  Regular Meeting      7   
 

3.5

  Special Meetings      7   
 

3.6

  Remote Meetings Permitted      8   
 

3.7

  Quorum      8   
 

3.8

  Waiver of Notice      8   
 

3.9

  Organization      8   
 

3.10

  Adjournment      8   
 

3.11

  Notice of Adjournment      9   
 

3.12

  Board Action by Written Consent Without Meeting      9   
 

3.13

  Powers      9   

 

-i-


TABLE OF CONTENTS

(continued)

 

             Page(s)  
  3.14   Fees and Compensation of Directors      9   
ARTICLE 4 COMMITTEES      9   
  4.1   Committees of Directors      9   
  4.2   Meetings and Action of Committees      10   
ARTICLE 5 OFFICERS      10   
  5.1   Generally      10   
  5.2   Election of Officers      10   
  5.3   Subordinate Officers      10   
  5.4   Removal and Resignation of Officers      10   
  5.5   Vacancies in Offices      10   
  5.6   Chief Executive Officer      11   
  5.7   Chairman of the Board.      11   
  5.8   President      11   
  5.9   Vice Presidents      11   
  5.10   Secretary      12   
  5.11   Chief Financial Officer      12   
  5.12   Treasurer      12   
ARTICLE 6 STOCK      12   
  6.1   Uncertificated Shares      13   
  6.2   Other Regulations      13   
ARTICLE 7 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS      13   
  7.1   Indemnification of Directors and Officers      13   
  7.2   Non-Exclusivity of Rights      13   
  7.3   Indemnification Contracts      14   
  7.4   Indemnification Of Others      14   
  7.5   Nature of Rights      14   
ARTICLE 8 RECORD AND REPORTS      14   
  8.1   Inspection of Share Register      14   
  8.2   Maintenance and Inspection of Bylaws      15   

 

-ii-


TABLE OF CONTENTS

(continued)

 

             Page(s)  
  8.3   Maintenance and Inspection of Other Corporate Records.      15   
  8.4   Inspection by Directors      15   
  8.5   Financial Statements      15   
ARTICLE 9 NOTICES      16   
  9.1   Form and Delivery      16   
  9.2   Electronic Transmission      16   
  9.3   Affidavit of Giving Notice      17   
ARTICLE 10 GENERAL CORPORATE MATTERS      17   
  10.1   Fiscal Year      17   
  10.2   Seal      17   
  10.3   Form of Records      17   
  10.4   Reliance upon Books and Records      17   
  10.5   Certificate of Incorporation Governs      17   
  10.6   Severability      17   
  10.7   Checks, Drafts, Evidences of Indebtedness      18   
  10.8   Corporate Contracts and Instruments; How Executed      18   
  10.9   Construction and Definitions      18   
ARTICLE 11 AMENDMENTS      18   
  11.1   Amendment by Stockholders      18   
  11.2   Amendment by Directors      18   
ARTICLE 12 INTERESTED DIRECTORS      18   
  12.1   Interested Directors      18   
  12.2   Quorum      19   

 

-iii-


AMENDED AND RESTATED BYLAWS

OF

ADESTO TECHNOLOGIES CORPORATION

a Delaware Corporation

As Adopted on September 28, 2015

ARTICLE 1

OFFICES

1.1 Principal Offices . The Board of Directors (the “Board”) shall fix the location of the principal executive office of the corporation at any place within or outside the State of Delaware.

1.2 Other Offices . The Board may at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE 2

STOCKHOLDERS

2.1 Place of Meetings . Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board or by means of remote communications as the Board in its sole discretion may determine. In the absence of any such designation, stockholders’ meetings shall be held at the principal executive office of the corporation.

2.2 Annual Meetings . Unless members of the Board are elected by written consent in lieu of an annual meeting, as permitted by Section 211 of the Delaware General Corporation Law (the “DGCL”) and these Bylaws, an annual meeting of the stockholders shall be held for the election of directors at such date and time as the Board shall each year fix. In the absence of such designation, the annual meeting of stockholders shall be held on the third Wednesday of February in each year at 10:00 a.m. However, if this day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. Any proper business may be transacted at the annual meeting.

2.3 Special Meetings . Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer, the President, the holders of shares of the Corporation that are entitled to cast not less than ten percent (10%) of the total number of votes entitled to be cast by all stockholders at such meeting, or by a majority of the “Whole Board,” which shall mean the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. Special meetings may not be called by any other person or persons. If a special meeting of stockholders is called by any person or persons other than by a majority of the members of the Board, then such person or persons shall request such meeting by delivering a written request to


call such meeting to each member of the Board, and the Board shall then determine the time and date of such special meeting, which shall be held not more than one hundred twenty (120) days nor less than thirty-five (35) days after the written request to call such special meeting was delivered to each member of the Board.

2.4 Notice of Meetings . Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by law (including without limitation, as set forth in Section 9.1 of these Bylaws) stating the date, time and place, if any, of the meeting and, (a) in the case of a special meeting, the purpose or purposes for which the meeting is called (no business other than that specified in the notice may be transacted), or (b) in the case of the annual meeting, those matters which the Board, at the time of giving the notice, intends to present for action by the stockholders (but subject to the provisions of the next paragraph of this Section 2.4 any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation (the “ Certificate of Incorporation ”), such notice shall be given not less than ten (10) (or, if sent by third-class mail, thirty (30)), and not more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting.

2.5 Quorum . At each meeting of stockholders the holders of a majority of the voting power of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, unless otherwise required by applicable law. If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum.

2.6 Adjourned Meeting; Notice . The chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any). Any meeting of stockholders may adjourn from time to time, and notice need not be given of any such adjourned meeting if the time, date and 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; provided, however, that if the adjournment is for more than thirty (30) days, or if a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. To the fullest extent permitted by law, the Board may postpone or reschedule any previously scheduled special or annual meeting of stockholders before it is to be held, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 2.4 above.

 

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Any stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 2.6 of this Article 2.

2.7 Organization . Meetings of stockholders shall be presided over by such person as the Board may designate, or, in the absence of such a person, the Chairman of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting and, subject to Section 2.12 hereof, 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 to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

2.8 Voting . Each stockholder entitled to vote at a meeting of stockholders, or to take corporate action by written consent without a meeting, may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Unless otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter.

The stockholder’s vote may be by voice vote or by ballot; provided, however, that any election for Directors must be by ballot if demanded by any stockholder before the voting has begun.

At a stockholders’ meeting at which Directors are to be elected, no stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of the stockholder’s shares) unless, at the time of such election, the corporation is subject to Section 2115 of the California Corporation Code. During such time or times that the corporation is subject to Section 2215(b) of the California Corporation Code, no stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless the candidates’ names have been placed in nomination prior to commencement of the voting and a stockholder has given notice at the meeting prior to commencement of the voting of the stockholder’s intention to cumulate votes. If any stockholder has given such a notice, then every stockholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of votes to which that stockholder’s shares are entitled, or distribute the stockholder’s votes on the same principle among any or all of the candidates, as the stockholder thinks fit. The candidates receiving the highest number of votes, up to the number of Directors to be elected, shall be elected.

2.9 Action by Written Consent Of Stockholders .

 

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(a) Procedure . Unless otherwise provided by the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of the 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 in the manner permitted by law by the holders of outstanding stock having not less than the 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 and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the agent of the Corporation’s registered office in the State of Delaware shall be by hand or by certified or registered mail, return receipt requested. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent in the manner permitted by law and shall be delivered to the Corporation as provided in Section 2.9(c) below. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation in the manner required by law, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the Corporation in the manner required by law.

(b) Form of Consent . A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxy holder, or a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the Corporation can determine (a) that the telegram, cablegram or other 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 (b) the date on which such stockholder or proxy holder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the Corporation or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board. Any copy, electronic submission, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

All such consents shall be maintained in the corporate records.

 

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(c) Notice of Consent . Prompt notice of the taking of corporate action by stockholders without a meeting by less than unanimous written consent of the stockholders shall be given to those stockholders who have not consented thereto 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 such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation as required by law. If the action which is consented to is such as would have required the filing of a certificate under the DGCL if such action had been voted on by stockholders at a meeting thereof, then if the DGCL so requires, the certificate so filed shall state, in lieu of any statement required by the DGCL concerning any vote of stockholders, that written stockholder consent has been given in accordance with Section 228 of the DGCL.

2.10 Record Date for Stockholder Notice, Voting, and Giving Consents . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or to take corporate action by written consent without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or 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, except as otherwise required by law, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60), nor less than ten (10), days before the date of such meeting, nor, more than sixty (60) days prior to any such action without a meeting. If no record date is fixed by the Board, then the record date shall be as provided by applicable law. To the fullest extent provided by law, 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 the adjourned meeting.

2.11 List of Stockholders Entitled to Vote . A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, 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 at the meeting. If the meeting is held solely by means of remote communication, then the list shall 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 the list shall be provided with the notice of the meeting.

2.12 Inspectors of Election.

(a) Applicability . Unless otherwise required by the Certificate of Incorporation or by the DGCL, the following provisions of this Section 2.12 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national

 

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securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 2.12 shall be optional, and at the discretion of the Board.

(b) Appointment . 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 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.

(c) Inspector’s Oath . Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.

(d) Duties of Inspectors . At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

(e) Opening and Closing of Polls . The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.

(f) Determinations . In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with any information provided pursuant to Section 211(a)(2)(B)(i) of the DGCL, or Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 2.12 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

 

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ARTICLE 3

DIRECTORS

3.1 Number and Qualification of Directors . The initial number of directors shall be seven (7), and, thereafter, unless otherwise required by law or the Certificate of Incorporation, shall be fixed from time to time by resolution of a majority of the Whole Board or the stockholders of the Corporation holding at least a majority of the voting power of the Corporation’s outstanding stock then entitled to vote at an election of directors. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.

3.2 Election and Term of Office of Directors . The Board shall initially consist of the person or persons elected by the incorporator or named in the Corporation’s initial Certificate of Incorporation. Each director, including a director elected to fill a vacancy, shall hold office until the next annual meeting of stockholders and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.

3.3 Resignation and Vacancies . Vacancies in the Board may be filled by a majority of the remaining Directors whether or not less than a quorum, or by a sole remaining Director. However, a vacancy created by the removal of a Director may be filled only by the affirmative vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of all of the outstanding shares entitled to vote. Each Director so elected shall hold office until the next annual meeting of the stockholders or until a successor has been elected and qualified.

The stockholders may elect a Director at any time to fill any vacancy not filled by the Directors. Any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote; provided however, that in the case of a vacancy created by removal, election to fill such vacancy by written consent requires the consent of all the outstanding shares entitled to vote.

Any Director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary, or the Board, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation of a Director is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

3.4 Regular Meeting . Immediately following each annual meeting of stockholders, the Board shall hold a regular meeting for the purpose of organization, any desired election of officers, and the transaction of other business. Notice of this meeting shall not be required. Other regular meetings of the Board shall be held quarterly at a time to be fixed by the Board. Such regular meetings may be held without notice.

3.5 Special Meetings . Special meetings of the Board for any purpose or purposes may be called at any time by the Chairman of the Board or the President or any Vice President or the Secretary or any two Directors or holders of at least twenty-five percent (25%) of the outstanding preferred shares of the corporation. Notice of the time, date and place of such

 

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meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least forty-eight (48) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission. Any oral notice given personally or by telephone, facsimile or electronic mail may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.

3.6 Remote Meetings Permitted . Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such 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 participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.

3.7 Quorum . Subject to Section 3.3 above regarding the ability of the members of the Board to fill a vacancy on the Board, and Section 3.10 below regarding the ability to adjourn a meeting of the Board, at all meetings of the Board a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time without further notice thereof. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.

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.

3.8 Waiver of Notice . The transactions of any meeting of the Board, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any Director who attends the meeting without protesting before or at its commencement the lack of notice to such Director.

3.9 Organization . Meetings of the Board shall be presided over by the Chairman of the Board, or in such person’s absence by the President, or in such person’s absence by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

3.10 Adjournment . A majority of the Directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.

 

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3.11 Notice of Adjournment . Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 3.11 of this Article 3, to the Directors who were not present at the time of the adjournment.

3.12 Board Action by Written Consent Without Meeting . 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 such 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, respectively, in the minute books of the Corporation. 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.

3.13 Powers . The Board may, except as otherwise required by law, the Certificate of Incorporation, or otherwise in these Bylaws, exercise all such powers and manage and direct all such acts and things as may be exercised or done by the Corporation.

3.14 Fees and Compensation of Directors . Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the Board. This Section 3.14 shall not be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for those services.

ARTICLE 4

COMMITTEES

4.1 Committees of Directors . The Board may, by resolution adopted by a majority of the authorized number of Directors, designate one or more committees, each consisting of two or more Directors, to serve at the pleasure of the Board. The Board may designate, by a vote of a majority of the authorized number of Directors, 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 the committee, the member or members thereof present at any meeting of such committee who are 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 place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, shall have and may exercise all the powers and authority of the Board 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 that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.

 

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4.2 Meetings and Action of Committees . The Board may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws. In the absence of rules adopted by the Board, these Bylaws shall govern the meetings and actions of committees, with such changes in application of these Bylaws as are necessary or appropriate for any committee.

ARTICLE 5

OFFICERS

5.1 Generally . The officers of the corporation shall be a Chief Executive Officer, a President, a Secretary and a Treasurer. The corporation may also have, at the discretion of the Board o, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of this Article 5. Any number of offices may be held by the same person.

5.2 Election of Officers . The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of this Article 5, shall be elected by the Board, and each shall serve at the pleasure of the Board, subject to the rights, if any, of an officer under any contract of employment.

5.3 Subordinate Officers . The Board may elect or may empower the President to appoint (except that the President may not appoint the Chairman of the Board, the President, the Chief Executive Officer or the Treasurer) such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws or as the Board o may from time to time determine.

5.4 Removal and Resignation of Officers . Each officer shall hold office until such person’s successor is appointed or until such person’s earlier resignation, death or removal. Any number of offices may be held by the same person. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board, at any regular or special meeting of the Board, or, except in case of an officer not 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 corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, 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 corporation under any contract to which the officer is a party.

5.5 Vacancies in Offices . A vacancy in any office because of death, resignation, removal, disqualification or any other cause may be filled in the manner prescribed in these Bylaws for regular appointments to that office.

 

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5.6 Chief Executive Officer . Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:

(a) To act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;

(b) Subject to Article 2, Section 2.7, to preside at all meetings of the stock-holders;

(c) Subject to Article 2, Section 2.3, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and

(d) To affix the signature of the Corporation to all deeds, conveyances, mort-gages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.

The President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board has not designated any other officer to be the Chief Executive Officer, then the Chairman of the Board shall be the Chief Executive Officer.

5.7 Chairman of the Board . The Chairman of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board or prescribed by the Bylaws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in Section 5.8 of this Article 5.

5.8 President . Subject to such supervisory powers, if any, as may be given by the Board to the Chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board, have general supervision, direction and control of the business and the officers of the corporation. He shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board. He shall have such other powers and duties as may be prescribed by the Board or the Bylaws.

5.9 Vice Presidents . In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board or, if not ranked, a Vice President designated by the Board, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board or the Bylaws.

 

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5.10 Secretary . The Secretary shall keep or cause to be kept, at the principal executive office or such other place as the Board may direct, a book of minutes of all meetings and actions of Directors, committees of Directors, and stockholders, showing (a) the time and place of meetings and whether regular or special; (b) in the case of special meetings, how authorized and the notice given; (c) the names of those present at Directors’ meetings or committee meetings; (d) the number of shares present or represented at stockholders meetings, and the proceedings.

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, a share register, or a duplicate share register, showing (a) the names of all stockholders and their addresses; (b) the number and classes of shares held by each; (c) the number and date of certificates issued for the same; and (d) the number and date of cancellation of every certificate surrendered for cancellation.

The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board required by the Bylaws or by law to be given, and he shall keep the seal of the corporation if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board or by the Bylaws.

5.11 Chief Financial Officer . The Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any Director.

The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board. He shall cause to be disbursed the funds of the corporation as may be ordered by the Board. He shall render to the President and Directors, whenever they request it, an account of all of the corporation’s transactions and of the financial condition of the corporation. He shall have other powers and perform such other duties as may be prescribed by the Board or the Bylaws.

5.12 Treasurer . The Treasurer shall have custody of all moneys and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.

ARTICLE 6

STOCK

 

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6.1 Uncertificated Shares . The shares of the Corporation shall be uncertificated, provided that the Corporation shall be permitted to issue such nominal number of certificates to securities depositories and provided further 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 represented by certificates. The Corporation shall not have power to issue a certificate representing shares in bearer form.

6.2 Other Regulations . The issue, transfer, conversion and registration of uncertificated securities shall be governed by such other regulations as the Board may establish.

ARTICLE 7

INDEMNIFICATION OF DIRECTORS,

OFFICERS, EMPLOYEES AND OTHER AGENTS

7.1 Indemnification of Directors and Officers . The corporation shall, to the maximum extent and in the manner permitted by the DGCL, indemnify each of its directors and officers against expenses (as defined in the DGCL), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in the DGCL), arising by reason of the fact that such person is or was an agent of the corporation, provided, however, that (a) if the DGCL then so requires, the payment of such expenses incurred by such an Indemnitee in advance of the final disposition of such Proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it should be determined ultimately by final judicial decision from which there is no appeal that such Indemnitee is not entitled to be indemnified under this Article 7 or otherwise; and (b) the Corporation shall not be required to advance any expenses to a person against whom the Corporation directly brings a claim, in a Proceeding, alleging that such person has breached such person’s duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction. For purposes of this Article 7, a “director” or “officer” of the corporation includes any person (a) who is or was a director or officer of the corporation, (b) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

7.2 Non-Exclusivity of Rights . The rights conferred on any person in this Article 7 shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article 7 shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article 7.

 

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7.3 Indemnification Contracts . The Board is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article 7.

7.4 Indemnification Of Others . The corporation shall have the power, to the extent and in the manner permitted by the DGCL, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in the DGCL), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in the DGCL), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article 7, an “employee” or “agent” of the corporation (other than a director or officer) includes any person (a) who is or was an employee or agent of the corporation, (b) who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was an employee or agent of a Corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

7.5 Nature of Rights . The rights conferred upon Indemnitees in this Article 7 shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any amendment, repeal or modification of any provision of this Article 7 that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article 7 and existing at the time of such amendment, repeal or modification.

ARTICLE 8

RECORD AND REPORTS

8.1 Inspection of Share Register . A stockholder or stockholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of stockholder’s names and addresses and shareholdings during usual business hours on five (5) days prior written demand on the corporation, and/or (ii) obtain from the transfer agent of the corporation, if any, on written demand and on the tender of such transfer agent’s usual charges for such list, a list of the stockholders’ names and addresses, who are entitled to vote for the election of Directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the stockholder after the date of demand. This list shall be made available to any such stockholder by the transfer agent on or before the later of five (5) days after the demand is received or the date specified in the demand as the date as of which the list is to be compiled.

 

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The record of stockholders shall also be open to inspection on the written demand of any stockholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder’s interests as a stockholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 8.1 may be made in person or by an agent or attorney of the stockholder or holder of a voting trust certificate making the demand.

8.2 Maintenance and Inspection of Bylaws . The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of Delaware, at its principal business office in this state, the original or a copy of the Bylaws as amended to date, which shall be open to inspection by the stockholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of Delaware and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any stockholder, furnish to that stockholder a copy of the Bylaws as amended to date.

8.3 Maintenance and Inspection of Other Corporate Records . The accounting books and records and minutes of proceedings of the stockholders and the Board and any committee or committees of the Board shall be kept at such place or places designated by the Board, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form; and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The foregoing documents shall be open to inspection upon the written demand of any stockholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder’s interests as a stockholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary corporation of the corporation.

8.4 Inspection by Directors . Every Director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a Director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents.

8.5 Financial Statements . A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months and each such statement shall be exhibited at all reasonable times to any stockholder demanding an examination of any such statement or a copy shall be mailed to any such stockholder.

If a stockholder or stockholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and a balance sheet of the corporation as of the end of that period, the Chief

 

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Financial Officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request.

The corporation shall also, on the written request of any stockholder, mail to the stockholder a copy of the last annual, semi-annual, or quarterly income statement which it has prepared, and a balance sheet as of the end of that period.

The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.

ARTICLE 9

NOTICES

9.1 Form and Delivery . Except as otherwise specifically required in these Bylaws (including, without limitation, Section 9.2 below) or by law, all notices required to be given pursuant to these Bylaws shall be in writing and may, (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, cablegram, overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively be delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 8.2 of this Article 9 by sending such notice by telegram, cablegram, facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via telegram, cablegram, facsimile, electronic mail or other form of electronic transmission, when dispatched.

9.2 Electronic Transmission . Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation 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 in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided , however , the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 9.2 shall be deemed given: (i) if by facsimile

 

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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; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.

9.3 Affidavit of Giving Notice . An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

ARTICLE 10

GENERAL CORPORATE MATTERS

10.1 Fiscal Year . The fiscal year of the Corporation shall be determined by resolution of the Board.

10.2 Seal . The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.

10.3 Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, diskettes, CDs, or any other information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.

10.4 Reliance upon Books and Records . A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

10.5 Certificate of Incorporation Governs . In the event of any conflict between the provisions of the Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern.

10.6 Severability . If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions

 

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of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.

10.7 Checks, Drafts, Evidences of Indebtedness . All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board.

10.8 Corporate Contracts and Instruments; How Executed . The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and unless so authorized or ratified by the Board 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.

10.9 Construction and 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 11

AMENDMENTS

11.1 Amendment by Stockholders . New Bylaws may be adopted or these Bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the Certificate of Incorporation of the corporation set forth the number of authorized Directors of the corporation, the authorized number of Directors may be changed only by an amendment of the Certificate of Incorporation.

11.2 Amendment by Directors . Subject to the rights of the stockholders as provided in Section 11.1 of this Article 11, Bylaws, other than a Bylaw or an amendment of a Bylaw changing the authorized number of Directors, may be adopted, amended, or repealed by the Board.

ARTICLE 12

INTERESTED DIRECTORS

12.1 Interested Directors . No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or

 

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participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.

12.2 Quorum . Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

 

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Exhibit 3.04

 

 

 

ADESTO TECHNOLOGIES CORPORATION

a Delaware Corporation

AMENDED AND RESTATED BYLAWS

As adopted on September 29, 2015

(Effective as of             , 2015)

 

 

 


ADESTO TECHNOLOGIES CORPORATION

a Delaware Corporation

AMENDED AND RESTATED BYLAWS

TABLE OF CONTENTS

 

             Page  
ARTICLE I: STOCKHOLDERS      1   
 

Section 1.1:

  Annual Meetings      1   
 

Section 1.2:

  Special Meetings      1   
 

Section 1.3:

  Notice of Meetings      1   
 

Section 1.4:

  Adjournments      1   
 

Section 1.5:

  Quorum      2   
 

Section 1.6:

  Organization      2   
 

Section 1.7:

  Voting; Proxies      2   
 

Section 1.8:

  Fixing Date for Determination of Stockholders of Record      2   
 

Section 1.9:

  List of Stockholders Entitled to Vote      3   
 

Section 1.10:

  Inspectors of Elections      3   
 

Section 1.11:

  Notice of Stockholder Business; Nominations      4   
ARTICLE II: BOARD OF DIRECTORS      7   
 

Section 2.1:

  Number; Qualifications      7   
 

Section 2.2:

  Election; Vacancies      7   
 

Section 2.3:

  Regular Meetings      7   
 

Section 2.4:

  Special Meetings      7   
 

Section 2.5:

  Remote Meetings Permitted      8   
 

Section 2.6:

  Quorum; Vote Required for Action.      8   
 

Section 2.7:

  Organization      8   
 

Section 2.8:

  Written Action by Directors      8   
 

Section 2.9:

  Powers      8   
 

Section 2.10:

  Compensation of Directors      8   
ARTICLE III: COMMITTEES      8   
 

Section 3.1:

  Committees      8   
 

Section 3.2:

  Committee Rules      9   
ARTICLE IV: OFFICERS      9   
 

Section 4.1:

  Generally      9   
 

Section 4.2:

  Chief Executive Officer      9   
 

Section 4.3:

  Chairperson of the Board      10   
 

Section 4.4:

  Lead Independent Director      10   
 

Section 4.5:

  President      10   
 

Section 4.6:

  Vice President      10   
 

Section 4.7:

  Chief Financial Officer      10   
 

Section 4.8:

  Treasurer      11   
 

Section 4.9:

  Secretary      11   
 

Section 4.10:

  Delegation of Authority      11   
 

Section 4.11:

  Removal      11   

 

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             Page  
ARTICLE V: STOCK      11   
 

Section 5.1:

  Uncertificated Shares      11   
 

Section 5.2:

  Multiple Classes of Stock      11   
 

Section 5.3:

  Signatures      11   
 

Section 5.4:

  Consideration and Payment for Shares      12   
 

Section 5.5:

  Lost, Destroyed or Wrongfully Taken Stock Certificates      12   
 

Section 5.6:

  Transfer of Stock      12   
 

Section 5.7:

  Registered Stockholders      13   
 

Section 5.8:

  Effect of Corporation’s Restriction on Transfer      13   
 

Section 5.9:

  Regulations      13   
ARTICLE VI: INDEMNIFICATION      14   
 

Section 6.1:

  Indemnification of Officers and Directors      14   
 

Section 6.2:

  Advance of Expenses      14   
 

Section 6.3:

  Non-Exclusivity of Rights      15   
 

Section 6.4:

  Indemnification Contracts      15   
 

Section 6.5:

  Right of Indemnitee to Bring Suit      15   
 

Section 6.6:

  Nature of Rights      16   
 

Section 6.7:

  Insurance      16   
ARTICLE VII: NOTICES      16   
 

Section 7.1:

  Notice      16   
 

Section 7.2:

  Waiver of Notice      17   
ARTICLE VIII: INTERESTED DIRECTORS      17   
 

Section 8.1:

  Interested Directors      17   
 

Section 8.2:

  Quorum      17   
ARTICLE IX: MISCELLANEOUS      17   
 

Section 9.1:

  Fiscal Year      17   
 

Section 9.2:

  Seal      18   
 

Section 9.3:

  Form of Records      18   
 

Section 9.4:

  Reliance Upon Books and Records      18   
 

Section 9.5:

  Certificate of Incorporation Governs      18   
 

Section 9.6:

  Severability      18   
 

Section 9.7:

  Time Periods      18   
ARTICLE X: AMENDMENT      18   

 

ii


ADESTO TECHNOLOGIES CORPORATION

a Delaware Corporation

AMENDED AND RESTATED BYLAWS

As adopted on September 29, 2015

(Effective as of             , 2015)

ARTICLE I: STOCKHOLDERS

Section 1.1: Annual Meetings. If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board of Directors of the Corporation (the “ Board ”) shall each year fix. The meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting.

Section 1.2: Special Meetings . Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the Lead Independent Director (as defined below) or the Board acting pursuant to a resolution adopted by a majority of the “ Whole Board ,” which shall mean the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. Special meetings may not be called by any other person or persons. The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine.

Section 1.3: Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by law (including, without limitation, as set forth in Section 7.1 of these Bylaws) stating the date, time and place, if any, of the meeting, the means of remote communications, if any, by which stockholders and proxyholders 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 the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation, as amended from time to time (the “ Certificate of Incorporation ”), such notice shall be given not less than ten (10) days, nor more than sixty (60) days, before the date of the meeting to each stockholder of record entitled to vote at such meeting.

Section 1.4: Adjournments. The chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any). Any meeting of stockholders may adjourn from time to time, and notice need not be given of any such adjourned meeting if the time, date and 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; provided , however , that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. To the fullest extent permitted by law, the Board may postpone or reschedule any previously scheduled special or annual meeting of stockholders before it is to be held, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 1.3 above.

 

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Section 1.5: Quorum . At each meeting of stockholders the holders of a majority of the voting power of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, except to the extent that the presence of the holders of a larger number of the shares of stock entitled to vote at the meeting may be required by applicable law. Where a separate vote by a class or classes or series is required, a majority of the voting power of the shares of such class 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. If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided , however , that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum.

Section 1.6: Organization . Meetings of stockholders shall be presided over by (a) such person as the Board may designate, or, (b) in the absence of such a person, the Chairperson of the Board, or, (c) in the absence of such person, the Lead Independent Director, or (d) in the absence of such person, the Chief Executive Officer of the Corporation, or, (e) in the absence of such person, the President or the most senior officer of the Corporation present, in that order of priority, or (f) in the absence of any such person, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting and, subject to Section 1.10 hereof, 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 to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

Section 1.7: Voting; Proxies . Unless otherwise provided by law or the Certificate of Incorporation, and subject to the provisions of Section 1.8 of these Bylaws, each stockholder shall be entitled to one (1) vote for each share of stock held by such stockholder. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Neither election of directors nor voting on other matters to be brought before the stockholders at meetings of stockholders need be by written ballot unless demand is so made by any stockholder at the meeting before voting begins or the chairperson of the meeting so elects. If a vote is to be taken by written ballot, then each such ballot shall state the name of the stockholder or proxy voting and such other information as the chairperson of the meeting deems appropriate and, if authorized by the Board, the ballot may be submitted by electronic transmission in the manner provided by law. Except as may be required in the Certificate of Incorporation, as may be amended from time to time, directors shall be elected by a plurality of the votes cast. Unless otherwise provided by applicable law, the rules of any stock exchange upon which the Corporation’s securities are listed, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by a majority of the votes cast for or against the matter.

Section 1.8: Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, unless otherwise required by law, the Board may fix, in advance, a record date, which

 

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shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60) days, nor less than ten (10) days, before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed by the Board, then the record date shall be as provided by applicable law. To the fullest extent permitted by law, 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 the adjourned meeting, in which case, such new record date shall apply to such adjourned meeting.

Section 1.9: List of Stockholders Entitled to Vote . A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, 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 at the meeting. If the meeting is held solely by means of remote communication, then the list shall 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 the list shall be provided with the notice of the meeting.

Section 1.10 : Inspectors of Elections .

(a) Applicability . Unless otherwise required by the Certificate of Incorporation or by the Delaware General Corporation Law (the “ DGCL ”), the following provisions of this Section 1.10 shall apply only if and when the Corporation has a class of voting stock that is: (i) listed on a national securities exchange; (ii) authorized for quotation on an interdealer quotation system of a registered national securities association; or (iii) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.10 shall be optional, and at the discretion of the Board.

(b) Appointment . 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 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.

(c) Inspector’s Oath . Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.

(d) Duties of Inspectors . At a meeting of stockholders, the inspectors of election shall (i) ascertain the number of shares outstanding and the voting power of each share, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

 

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(e) Opening and Closing of Polls . The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.

(f) Determinations . In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with any information provided pursuant to Section 211(a)(2)(B)(i) or (iii) of the DGCL, or Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.10 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

Section 1.11 : Notice of Stockholder Business; Nominations .

(a) Annual Meeting of Stockholders .

(i) Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders shall be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of such meeting, (B) by or at the direction of the Board or (C) by any stockholder of the Corporation who was a stockholder of record (the “ Record Stockholder ”) at the time of giving of the notice provided for in this Section 1.11, who is entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 1.11. For the avoidance of doubt, the foregoing clause (C) shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “ Exchange Act ”)), at an annual meeting of stockholders.

(ii) For nominations or other business to be properly brought before an annual meeting by a Record Stockholder pursuant to Section 1.11(a)(i)(C):

(A) the Record Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation;

(B) such other business must otherwise be a proper matter for stockholder action under the DGCL;

(C) if the Record Stockholder, or the beneficial owner, if any, on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice, as that term is defined in this Section, such Record Stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such Record Stockholder or

 

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beneficial holder, as the case may be, to be sufficient to elect the nominee or nominees proposed to be nominated by such Record Stockholder, and must, in either case, have included in such materials the Solicitation Notice (as defined below); and

(D) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section, the Record Stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section.

To be timely, a Record Stockholder’s notice must be received by the Secretary of the Corporation at the principal executive offices of the Corporation not later than 5:00 pm Eastern Time on the seventy-fifth (75th) day nor earlier than 5:00 pm Eastern Time on the one hundred and fifth (105th) day prior to the first anniversary of the preceding year’s annual meeting (except in the case of the Corporation’s first annual meeting following the closing of the Corporation’s initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the “ Initial Public Offering Closing ”), for which such notice shall be timely if delivered in the same time period as if such meeting were a special meeting governed by Section 1.11(b)); provided , however , that, subject to the immediately following sentence, in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, or if (other than with respect to the Corporation’s first annual meeting following the Initial Public Offering Closing) no annual meeting was held in the preceding year, notice by the Record Stockholder to be timely must be received on the later of (A) no earlier than 5:00 pm Eastern Time on the one hundred and fifth (105th) day prior to currently proposed annual meeting and no later than 5:00 pm Eastern Time on the later of the seventy-fifth (75th) day prior to such annual meeting or (B) 5:00 pm Eastern Time on the tenth (10th) day following the day on which Public Announcement (as defined below) of the date of such meeting is first made by the Corporation. In no event shall an adjournment, or postponement of an annual meeting for which notice has been given, commence a new time period for providing the stockholder’s notice. Such Record Stockholder’s notice shall set forth:

(X) if such notice pertains to the nomination of directors, as to each person whom the Record Stockholder proposes to nominate for election or reelection as a director all information relating to such person that would be required to be disclosed in solicitations of proxies for election of such nominees as directors, or would be otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected;

(Y) as to any other business that the Record Stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such Record Stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and

(Z) as to the Record Stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such Record Stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (2) the class, series, and number of shares of the Corporation that are directly or indirectly owned beneficially and held of record by such Record Stockholder and such beneficial owner, including any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “ Derivative Instrument ”) directly or indirectly owned

 

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beneficially by such Record Stockholder or beneficial owner, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (3) whether or not either such Record Stockholder or beneficial owner will deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting power required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting power reasonably believed by such Record Stockholder or beneficial holder to be sufficient to elect such nominee or nominees (an affirmative statement of such intent being a “ Solicitation Notice ”), (4) any proxy, contract, arrangement, understanding, or relationship pursuant to which the Record Stockholder or beneficial owner has a right to vote, directly or indirectly, any shares of any security of the Corporation, (5) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Record Stockholder’s notice by, or on behalf of, such Record Stockholder and such beneficial owners, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such Record Stockholder or such beneficial owner, with respect to shares of stock of the Corporation, (6) a representation that the Record Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination and (7) any other information relating to each such Record Stockholder or beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or the election of directors in a contested election pursuant to Section 14 of the Exchange Act. If requested by the Corporation, the information required under clauses (2)-(7) of this Section 1.11(a)(ii)(Z) shall be supplemented by such stockholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such information as of the record date.

(iii) Notwithstanding anything in the second sentence of Section 1.11(a)(ii) to the contrary, in the event that the number of directors to be elected to the Board is increased and the Public Announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board does not occur at least seventy five (75) days prior to the first anniversary of the preceding year’s annual meeting (or, if the annual meeting is held more than thirty (30) days before or sixty (60) days after such anniversary date, at least seventy five (75) days prior to such annual meeting), a stockholder’s notice required by this Section 1.11 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive office of the Corporation no later than the 5:00 pm Eastern Time on the tenth (10th) day following the day on which the Public Announcement naming all of the nominees for director or specifying the size of the increased Board is first made by the Corporation.

(b) Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (a) by or at the direction of the Board or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.11. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 1.11(a)(ii) shall be received by the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the one hundred fifth (105th) day prior to such special meeting and (ii) no later than

 

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5:00 pm Eastern Time on the later of the seventy fifth (75th) day prior to such special meeting or the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.

(c) General .

(i) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.11 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.11. Except as otherwise provided by law or these Bylaws, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.11 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

(ii) For purposes of this Section 1.11, the term “ Public Announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Reuters, PR Newswire, or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(d) Notwithstanding the foregoing provisions of this Section 1.11, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.11 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

ARTICLE II: BOARD OF DIRECTORS

Section 2.1: Number; Qualifications . The Board shall consist of one or more members. The number of directors shall be fixed from time to time as set forth in the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.

Section 2.2: Election; Vacancies . The directors shall be divided, with respect to the time for which they severally hold office, into classes as provided in the Certificate of Incorporation, and vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled, as provided in the Certificate of Incorporation.

Section 2.3: Regular Meetings . Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.

Section 2.4: Special Meetings . Special meetings of the Board may be called by the Chairperson of the Board, the Chief Executive Officer, the President, the Lead Independent Director or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is

 

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given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.

Section 2.5: Remote Meetings Permitted . Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such 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 participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.

Section 2.6: Quorum; Vote Required for Action. Subject to the Certificate of Incorporation, as may be amended from time to time, regarding the ability of members of the Board to fill a vacancy occurring in the Board, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time without further notice thereof. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.

Section 2.7: Organization . Meetings of the Board shall be presided over by (a) the Chairperson of the Board or, (b) in the absence of such person, the Lead Independent Director, or (c) in the absence of such person, the Chief Executive Officer of the Corporation, or, (d) in the absence of such person, by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

Section 2.8: Written Action by Directors. 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 such 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, respectively, in the minute books of the Corporation. 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.

Section 2.9: Powers . The Board may, except as otherwise required by law or the Certificate of Incorporation, exercise all such powers and manage and direct all such acts and things as may be exercised or done by the Corporation.

Section 2.10 : Compensation of Directors . Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.

ARTICLE III: COMMITTEES

Section 3.1: Committees . The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. 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 the committee, the member or members thereof present at any meeting of such committee who are 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 place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, shall have and may

 

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exercise all the powers and authority of the Board 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 that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.

Section 3.2: Committee Rules . Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business not in conflict with the provisions of this Article III. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws. Adequate provision shall be made for notice to members of a committee of all meetings of such committee, and, unless such committee has determined otherwise, all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of such 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.

ARTICLE IV: OFFICERS

Section 4.1: Generally . The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a Secretary and a Treasurer and may consist of such other officers, including a Chief Financial Officer and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided , however , that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chairperson of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until such person’s successor is appointed or until such person’s earlier resignation, death or removal. Any number of offices may be held by the same person. Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board.

Section 4.2: Chief Executive Officer . Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:

(a) To act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;

(b) Subject to Section 1.6, to preside at all meetings of the stockholders;

(c) Subject to Section 1.2, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper;

(d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and,

 

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subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation; and

(e) To vote and otherwise act on, or to authorize any officer to vote or otherwise act on, on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise, or authorize any officer otherwise to exercise, any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

The President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board has not designated any other officer to be the Chief Executive Officer, then the Chairperson of the Board shall be the Chief Executive Officer.

Section 4.3: Chairperson of the Board . Subject to the provisions of Section 2.7, the Chairperson of the Board shall have the power to preside at all meetings of the Board, shall have the power to sign certificates for shares of stock of the Corporation, and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe.

Section 4.4: Lead Independent Director . The Board may, in its discretion elect a lead independent director from among its members that are Independent Directors (as defined below) (such director, the “ Lead Independent Director ”). He or she shall preside at all meetings at which the Chairperson of the Board is not present and shall exercise such other powers and duties as may from time to time be assigned to him or her by the Board or as prescribed by these Bylaws. For purposes of these Bylaws, “ Independent Director ” has the meaning ascribed to such term under the rules of the stock exchange upon which the Corporation’s common stock is primarily traded.

Section 4.5: President . The Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one individual as the President and a different individual as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President), shall have the power to sign certificates for shares of stock of the Corporation, and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.

Section 4.6: Vice President . Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer’s absence or disability.

Section 4.7: Chief Financial Officer . The Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer, or as the Board may from time to time prescribe.

 

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Section 4.8: Treasurer . The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall have the power to sign certificates for shares of stock of the Corporation also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.

Section 4.9: Secretary . The Secretary shall issue or cause to be issued all authorized notices for, and shall record, or cause to be recorded, the proceedings of all meetings of the stockholders and the Board in a book to be kept for such purposes. The Secretary shall have charge of the corporate minute books and similar records, shall have the power to sign certificates for shares of stock of the Corporation, and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.

Section 4.10 : Delegation of Authority . The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

Section 4.11: Removal . Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any Vice Presidents of the Corporation, then such Vice Presidents may be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.

ARTICLE V: STOCK

Section 5.1: Uncertificated Shares . The shares of the Corporation shall be uncertificated, provided that the Corporation shall be permitted to issue such nominal number of certificates to securities depositories and provided further 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 represented by certificates. The Corporation shall not have power to issue a certificate representing shares in bearer form.

Section 5.2: Multiple Classes of Stock . If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the Corporation shall (a) cause 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 or rights to be set forth in full or summarized on the face or back of any certificate that the Corporation issues to represent shares of such class or series of stock or (b) in the case of uncertificated shares, within a reasonable time after the issuance or transfer of such shares, send to the registered owner thereof a written notice containing the information required to be set forth on certificates as specified in clause (a) above; provided, however, that, except as otherwise provided by applicable law, in lieu of the foregoing requirements, there may be set forth on the face or back of such certificate or, in the case of uncertificated shares, on such written notice 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 or rights.

Section 5.3: Signatures . Each holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairperson or Vice-Chairperson of the Board, or the Chief Executive Officer or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares owned by such holder in the Corporation in certificate form. Any or all of the

 

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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 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 such person were an officer, transfer agent or registrar at the date of issue.

Section 5.4: Consideration and Payment for Shares .

(a) Permitted Consideration . Subject to applicable law and the Certificate of Incorporation, shares of stock may be issued for such consideration, having in the case of shares with par value a value not less than the par value thereof, and to such persons, as determined from time to time by the Board. The consideration may consist of any tangible or intangible property or benefit to the Corporation including, but not limited to, cash, promissory notes, services performed, contracts for services to be performed or other securities.

(b) Payment for Shares . Subject to applicable law and the Certificate of Incorporation, shares may not be issued until the full amount of the consideration has been paid, unless upon the face or back of each certificate issued to represent any partly paid shares of capital stock or upon the books and records of the Corporation in the case of partly paid uncertificated shares, there shall have been set forth the total amount of the consideration to be paid therefor and the amount paid thereon up to and including the time said certificate representing certificated shares or said uncertificated shares are issued.

Section 5.5: Lost, Destroyed or Wrongfully Taken Stock Certificates .

(a) Replacement . If an owner of a certificate representing shares claims that such certificate has been lost, destroyed or wrongfully taken, the Corporation shall issue a new certificate representing such shares or such shares in uncertificated form if the owner: (i) requests such a new certificate before the Corporation has notice that the certificate representing such shares has been acquired by a protected purchaser; (ii) if requested by the Corporation, delivers to the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, wrongful taking or destruction of such certificate or the issuance of such new certificate or uncertificated shares; and (iii) satisfies other reasonable requirements imposed by the Corporation.

(b) Failure to Notify . If a certificate representing shares has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the Corporation of that fact within a reasonable time after the owner has notice of such loss, apparent destruction or wrongful taking and the Corporation registers a transfer of such shares before receiving notification, the owner shall, to the fullest extent permitted by law, be precluded from asserting against the Corporation any claim for registering such transfer or a claim to a new certificate representing such shares or such shares in uncertificated form.

Section 5.6: Transfer of Stock .

(a) Complete Transfers . If a certificate representing shares of the Corporation is presented to the Corporation with an endorsement requesting the registration of transfer of such shares or an instruction is presented to the Corporation requesting the registration of transfer of uncertificated shares, the Corporation shall register the transfer as requested if:

(i) in the case of certificated shares, the certificate representing such shares has been surrendered;

(ii) (A) with respect to certificated shares, the endorsement is made by the person specified by the certificate as entitled to such shares; (B) with respect to uncertificated shares, an

 

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instruction is made by the registered owner of such uncertificated shares; or (C) with respect to certificated shares or uncertificated shares, the endorsement or instruction is made by any other appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;

(iii) the Corporation has received a guarantee of signature of the person signing such endorsement or instruction or such other reasonable assurance that the endorsement or instruction is genuine and authorized as the Corporation may request;

(iv) the transfer does not violate any restriction on transfer imposed by the Corporation that is enforceable in accordance with Section 5.8; and

(v) such other conditions for such transfer as shall be provided for under applicable law have been satisfied.

(b) Other Transfers . Whenever any transfer of shares shall be made for collateral security and not absolutely, the Corporation shall so record such fact in the entry of transfer if, when the certificate for such shares is presented to the Corporation for transfer or, if such shares are uncertificated, when the instruction for registration of transfer thereof is presented to the Corporation, both the transferor and transferee request the Corporation to do so.

Section 5.7: Registered Stockholders . Before due presentment for registration of transfer of a certificate representing shares of the Corporation or of an instruction requesting registration of transfer of uncertificated shares, the Corporation may treat the registered owner as the person exclusively entitled to inspect for any proper purpose the stock ledger and the other books and records of the Corporation, vote such shares, receive dividends or notifications with respect to such shares and otherwise exercise all the rights and powers of the owner of such shares, except that a person who is the beneficial owner of such shares (if held in a voting trust or by a nominee on behalf of such person) may, upon providing documentary evidence of beneficial ownership of such shares and satisfying such other conditions as are provided under applicable law, may also so inspect the books and records of the Corporation.

Section 5.8: Effect of Corporation’s Restriction on Transfer .

(a) Enforceability . A written restriction on the transfer or registration of transfer of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, if permitted by the DGCL and noted conspicuously on the certificate representing such shares or, in the case of uncertificated shares, contained in a notice sent by the Corporation to the registered owner of such shares within a reasonable time after the issuance or transfer of such shares, may be enforced against the holder of such shares or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.

(b) Notification . A restriction imposed by the Corporation on the transfer or the registration of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, even if otherwise lawful, is ineffective against a person without actual knowledge of such restriction unless: (i) the shares are certificated and such restriction is noted conspicuously on the certificate; or (ii) the shares are uncertificated and such restriction was contained in a notice sent by the Corporation to the registered owner of such shares within a reasonable time after the issuance or transfer of such shares.

Section 5.9: Regulations . The Board shall have power and authority to make such additional rules and regulations, subject to any applicable requirement of law, as the Board may deem necessary and

 

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appropriate with respect to the issue, transfer or registration of transfer of shares of stock or certificates representing shares. The Board may appoint one or more transfer agents or registrars and may require for the validity thereof that certificates representing shares bear the signature of any transfer agent or registrar so appointed.

ARTICLE VI: INDEMNIFICATION

Section 6.1: Indemnification of Officers and Directors . Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or other proceeding, whether civil, criminal, administrative, investigative, legislative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing (a “ Proceeding ”), by reason of the fact that such person (or a person of whom such person is the legal representative), is or was a member of the Board or officer of the Corporation or a Reincorporated Predecessor (as defined below) or is or was serving at the request of the Corporation or a Reincorporated Predecessor as a member of the board of directors, officer or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (for purposes of this Article VI, an “ Indemnitee ”), whether the basis of such Proceeding is alleged action in an official capacity as a director, officer or trustee, or in any other capacity while serving as a director, officer or trustee, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law, 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 such law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a manner that the 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 the Indemnitee’s conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board or is expressly permitted by Section 6.5 hereof, or such indemnification is authorized by an agreement approved by the Board. To the extent that a present or former director or officer of the Corporation or Reincorporated Predecessor has been successful on the merits or otherwise in defense of any action, suit or proceeding described in this Section 6.1 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. As used herein, the term the “ Reincorporated Predecessor ” means (a) a corporation that is merged with and into the Corporation in a statutory merger where (i) the Corporation is the surviving corporation of such merger; (ii) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware or (b) a limited liability company that is converted into a Delaware Corporation pursuant to DGCL § 265.

Section 6.2: Advance of Expenses . Except as otherwise provided in a written indemnification agreement between the Corporation and an Indemnitee, the Corporation shall pay all expenses (including attorneys’ fees) incurred by such an Indemnitee in defending any such Proceeding as they are incurred in advance of its final disposition; provided , however , that if the DGCL then so requires, the payment of such expenses incurred by such an Indemnitee in advance of the final disposition of such Proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it should be determined ultimately by final judicial

 

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decision from which there is no appeal that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise. Notwithstanding the foregoing, unless otherwise determined pursuant to Section 6.3, no advance hereunder 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 sentence shall not apply) in any Proceeding if a determination is reasonably and promptly made (i) by a majority vote of directors who were not parties to the Proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person did not act in good faith or in a manner that such person believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal action or Proceeding, such person had cause to believe that such person’s conduct was unlawful.

Section 6.3: Non-Exclusivity of Rights . The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its sole discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.

Section 6.4: Indemnification Contracts . The Board is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.

Section 6.5: Right of Indemnitee to Bring Suit . The following shall apply to the extent not in conflict with any indemnification contract provided for in Section 6.4 above.

(a) Right to Bring Suit . If a claim under Section 6.1 or 6.2 of this Article VI 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. To the fullest extent permitted by law, 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. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in applicable law.

(b) Effect of Determination . Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a

 

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presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.

(c) Burden of Proof . In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought 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 VI, or otherwise, shall be on the Corporation.

Section 6.6: Nature of Rights . The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI with respect to any Proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment, repeal or modification.

Section 6.7: Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

ARTICLE VII: NOTICES

Section 7.1: Notice .

(a) Form and Delivery . Except as otherwise specifically permitted or required in these Bylaws (including, without limitation, Section 7.1(b) below) or required by law, all notices required to be given pursuant to these Bylaws shall be in writing and may, (i) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, cablegram, overnight express courier, facsimile, electronic mail or other form of electronic transmission and (ii) effectively be delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 7.1(b) of this Article VII by sending such notice by telegram, cablegram, facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The notice shall be deemed given (w) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (x) in the case of delivery by mail, upon deposit in the mail, (y) in the case of delivery by overnight express courier, when dispatched, and (z) in the case of delivery via telegram, cablegram, facsimile, electronic mail or other form of electronic transmission, when dispatched.

(b) Electronic Transmission . Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation 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 in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver

 

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by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided , however , the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1(b) shall be deemed given: (w) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (x) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (y) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (z) if by any other form of electronic transmission, when directed to the stockholder.

(c) Affidavit of Giving Notice . An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Section 7.2: 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 of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, 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 waiver of notice.

ARTICLE VIII: INTERESTED DIRECTORS

Section 8.1: Interested Directors . No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the Board or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.

Section 8.2: Quorum . Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

ARTICLE IX: MISCELLANEOUS

Section 9.1: Fiscal Year . The fiscal year of the Corporation shall be determined by resolution of the Board.

 

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Section 9.2: Seal . The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.

Section 9.3: Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of any information storage device or method, electronic or otherwise, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.

Section 9.4: Reliance Upon Books and Records . A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 9.5: Certificate of Incorporation Governs . In the event of any conflict or inconsistency between the provisions of the Certificate of Incorporation and these Bylaws, the provisions of the Certificate of Incorporation shall govern and prevail.

Section 9.6: Severability . If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.

Section 9.7: Time Periods . In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

ARTICLE X: AMENDMENT

Notwithstanding any other provision of these Bylaws, any amendment or repeal of these Bylaws shall require the approval of the Whole Board or the stockholders of the Corporation as provided in the Certificate of Incorporation.

*     *    *    *    *

 

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CERTIFICATION OF AMENDED AND RESTATED BYLAWS

OF

ADESTO TECHNOLOGIES CORPORATION

a Delaware Corporation

I, Ron Shelton, certify that I am Secretary of Adesto Technologies Corporation, a Delaware corporation (the “ Corporation ”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Amended and Restated Bylaws of the Corporation in effect as of the date of this certificate.

 

Dated:                     , 2015      
     

 

      Ron Shelton, Secretary

Exhibit 10.01

INDEMNITY AGREEMENT

This Indemnity Agreement, dated as of             , 2015 (this “Agreement”) is made by and between Adesto Technologies Corporation, a Delaware corporation (the “ Company ”), and             , a director, officer or key employee of the Company or one of the Company’s subsidiaries or other service provider who satisfies the definition of Indemnifiable Person set forth below (“ Indemnitee ”).

RECITALS

A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as representatives of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such representatives;

B. The members of the Board of Directors of the Company (the “ Board ”) have concluded that to retain and attract talented and experienced individuals to serve as representatives of the Company and its Subsidiaries and Affiliates and to encourage such individuals to take the business risks necessary for the success of the Company and its Subsidiaries and Affiliates, it is necessary for the Company to contractually indemnify certain of its representatives and the representatives of its Subsidiaries and Affiliates, and to assume for itself maximum liability for Expenses and Other Liabilities in connection with claims against such representatives in connection with their service to the Company and its Subsidiaries and Affiliates;

C. Section 145 of the Delaware General Corporation Law (“ Section 145 ”), empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations, partnerships, joint ventures, trusts or other enterprises, and expressly provides that the indemnification provided thereby is not exclusive; and

D. The Company desires and has requested Indemnitee to serve or continue to serve as a representative of the Company and/or the Subsidiaries or Affiliates of the Company free from undue concern about unreasonable claims for damages arising out of or related to such services to the Company and/or the Subsidiaries or Affiliates of the Company.

E. [The Company (or a predecessor corporation) and Indemnitee previously entered into an Indemnification Agreement, dated as of [            ] (the “ Prior Agreement ”), and the Company and Indemnitee desire to amend and restate the Prior Agreement in its entirety to set forth their agreements and understandings with respect to indemnification matters, all on the terms and conditions as set forth in this Agreement.]


AGREEMENT

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Definitions .

(a) Affiliate . For purposes of this Agreement, “Affiliate” of the Company means any corporation, partnership, limited liability company, joint venture, trust or other enterprise in respect of which Indemnitee is or was or will be serving as a director, officer, trustee, manager, member, partner, employee, agent, attorney, consultant, member of the entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise), fiduciary, or in any other similar capacity at the request, election or direction of the Company, and including, but not limited to, any employee benefit plan of the Company or a Subsidiary or Affiliate of the Company.

(b) Change in Control . For purposes of this Agreement, “Change in Control” means (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)), other than a Subsidiary or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Subsidiary, 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 total voting power represented by the Company’s then outstanding capital stock, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the outstanding capital stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) at least 80% of the total voting power represented by the capital stock of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.

(c) Expenses . For purposes of this Agreement, “Expenses” means all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, bonds and other out-of-pocket costs), paid or incurred by Indemnitee in connection with either the investigation, defense or appeal of, or being a witness in, a Proceeding (as defined below), or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise; provided, however, that Expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a Proceeding.

 

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(d) Indemnifiable Event . For purposes of this Agreement, “Indemnifiable Event” means any event or occurrence related to Indemnitee’s service for the Company or any Subsidiary or Affiliate in any capacity as an Indemnifiable Person (as defined below), or by reason of anything done or not done, or any act or omission, by Indemnitee in any such capacity, regardless of whether any such event or occurrence occurred before or after the Effective Date (as defined below).

(e) Indemnifiable Person . For the purposes of this Agreement, “Indemnifiable Person” means any person who is or was a director, officer, trustee, manager, member, partner, employee, attorney, consultant, member of an entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise) or other agent or fiduciary of the Company or a Subsidiary or Affiliate of the Company.

(f) Independent Counsel . For purposes of this Agreement, “Independent Counsel” means legal counsel that has not performed services for the Company or Indemnitee in the five years preceding the time in question and that would not, under applicable standards of professional conduct, have a conflict of interest in representing either the Company or Indemnitee.

(g) Other Liabilities . For purposes of this Agreement, “Other Liabilities” means any and all liabilities of any type whatsoever (including, but not limited to, judgments, fines, penalties, ERISA (or other benefit plan related) excise taxes or penalties, and amounts paid in settlement and all interest, taxes, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA (or other benefit plan related) excise taxes or penalties, or amounts paid in settlement).

(h) Proceeding . For the purposes of this Agreement, “Proceeding” means any threatened, pending, or completed claim, demand, action, suit, inquiry or other proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative, investigative, legislative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing.

(i) Subsidiary . For purposes of this Agreement, “Subsidiary” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.

2. Agreement to Serve . The Indemnitee agrees to serve and/or continue to serve as an Indemnifiable Person in the capacity or capacities in which Indemnitee currently serves the Company as an Indemnifiable Person, and any additional capacity in which Indemnitee may agree to serve, until such time as Indemnitee’s service in a particular capacity shall end according to the terms of an agreement, the Company’s then-current Certificate of Incorporation or Bylaws, governing law, or otherwise. Nothing contained in this Agreement is intended to create any right to continued employment or other form of service for the Company or a Subsidiary or Affiliate of the Company by Indemnitee.

 

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3. Mandatory Indemnification .

(a) Agreement to Indemnify . In the event Indemnitee is a person who was or is a party to or witness in or is threatened to be made a party to or witness in any Proceeding by reason of an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses and Other Liabilities incurred by Indemnitee in connection with (including in preparation for) such Proceeding to the fullest extent not prohibited by the provisions of the Company’s Bylaws and the Delaware General Corporation Law, as amended (“ DGCL ”), as the same exists or may be amended from time to time (but only to the extent that such amendment permits the Company to provide broader indemnification rights than the Bylaws or the DGCL permitted prior to the adoption of such amendment).

(b) Exception for Amounts Covered by Insurance and Other Sources . Notwithstanding the foregoing, except as provided in Section 3(c), the Company shall not be obligated to indemnify Indemnitee for Expenses or Other Liabilities of any type whatsoever (including, but not limited to judgments, fines, penalties, ERISA excise taxes or penalties and amounts paid in settlement) to the extent such have been paid directly to Indemnitee (or paid directly to a third party on Indemnitee’s behalf) by any directors and officers, or other type, of insurance maintained by the Company or pursuant to other indemnity arrangements with third parties.

(c) Company Obligations Primary . The Company hereby acknowledges that Indemnitee may have rights to indemnification for Expenses and Other Liabilities provided by another sponsoring organization (“ Other Indemnitor ”). The Company agrees with Indemnitee that the Company is the indemnitor of first resort of Indemnitee with respect to matters for which indemnification is provided under this Agreement and that the Company will be obligated to make all payments due to or for the benefit of Indemnitee under this Agreement without regard to any rights that Indemnitee may have against the Other Indemnitor. The Company hereby waives any equitable rights to contribution or indemnification from the Other Indemnitor in respect of any amounts paid to Indemnitee hereunder. The Company further agrees that no reimbursement of Other Liabilities or payment of Expenses by the Other Indemnitor to or for the benefit of Indemnitee shall affect the obligations of the Company hereunder, and that the Company shall be obligated to repay the Other Indemnitor for all amounts so paid or reimbursed to the extent that the Company has an obligation to indemnify Indemnitee for such Expenses or Other Liabilities hereunder.

4. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses or Other Liabilities but not entitled, however, to indemnification for the total amount of such Expenses or Other Liabilities, the Company shall nevertheless indemnify Indemnitee for such total amount except as to the portion thereof for which indemnification is prohibited by the provisions of the Company’s Bylaws or the DGCL. In any review or Proceeding to determine the extent of indemnification, the Company shall bear the burden to establish, by clear and convincing evidence, the lack of a successful resolution of a particular claim, issue or matter and which amounts sought in indemnity are allocable to claims, issues or matters which were not successfully resolved.

 

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5. Liability Insurance . So long as Indemnitee shall continue to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding as a result of an Indemnifiable Event, the Company shall use reasonable efforts to maintain in full force and effect for the benefit of Indemnitee as an insured (a) liability insurance issued by one or more reputable insurers and having the policy amount and deductible deemed appropriate by the Board and providing in all respects coverage at least comparable to and in the same amount as that provided to the Chairman of the Board or the Chief Executive Officer of the Company and (b) any replacement or substitute policies issued by one or more reputable insurers providing in all respects coverage at least comparable to and in the same amount as that being provided to the Chairman of the Board or the Chief Executive Officer of the Company. The purchase, establishment and maintenance of any such insurance or other arrangements shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such insurance or other arrangement.

6. Mandatory Advancement of Expenses .

(a) Advancement . If requested by the Indemnitee, the Company shall advance prior to the final disposition of the Proceeding all Expenses reasonably incurred by Indemnitee in connection with (including in preparation for) a Proceeding related to an Indemnifiable Event. Indemnitee hereby undertakes to repay all amounts so advanced if, and only if and to the extent that, it should be determined ultimately by final judicial decision from which there is no appeal that such Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Company’s Bylaws, the Company’s Certificate of Incorporation or the DGCL. Any Expenses advanced to Indemnitee hereunder shall be unsecured and shall not be subject to the accrual or payment of any interest thereon or to Indemnitee’s ability to repay such amounts. The advances to be made hereunder shall be paid by the Company to Indemnitee or directly to a third party designated by Indemnitee within thirty (30) days following delivery of a written request by Indemnitee to the Company.

(b) Exception . Notwithstanding Section 6(a), if the Indemnity is an officer of the Company, the Company shall not be obligated to make any further advance of Expenses to Indemnitee (except by reason of the fact that such Indemnitee is or was a director of the Company in which event this Section 6(b) shall not apply) in any Proceeding if a determination is made (i) by a majority vote of directors who were not parties to the Proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that Indemnitee did not act in good faith or in a manner that Indemnitee believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or Proceeding, Indemnitee had cause to believe that Indemnitee’s conduct was unlawful. If the matter is submitted to independent counsel and there are directors who are not parties to the Proceeding, such counsel shall be selected by Indemnitee and approved by such directors or a

 

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committee of such directors (which approval may not be unreasonably withheld). Any decision maker so selected shall render a decision within thirty (30) days of such decision maker’s selection (which shall include in the case of independent counsel, when the person or persons acting as such counsel has or have been selected as provided above). If a decision is made by the decision maker that Indemnitee has failed to meet the applicable standard of conduct, Indemnitee shall have the right to apply to the Delaware Court of Chancery for the purpose of determining whether Indemnitee has failed to meet the applicable standard of conduct.

7. Notice and Other Indemnification Procedures .

(a) Notification . Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, Indemnitee shall, if Indemnitee believes that indemnification or advancement of Expenses with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. However, a failure so to notify the Company promptly following Indemnitee’s receipt of such notice shall not relieve the Company from any liability that it may have to Indemnitee except to the extent that the Company is materially prejudiced in its defense of such Proceeding as a result of such failure.

(b) Insurance and Other Matters . If, at the time of the receipt of a notice of the commencement of a Proceeding pursuant to Section 7(a) above, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the issuers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such insurance policies.

(c) Assumption of Defense . In the event the Company shall be obligated to advance the Expenses for any Proceeding against Indemnitee, the Company, if deemed appropriate by the Company, shall be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations. Following delivery of written notice to Indemnitee of the Company’s election to assume the defense of such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld) of counsel designated by the Company and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. If (i) the employment of counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have notified the Board in writing that Indemnitee has reasonably concluded that there is likely to be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (iii) the Company fails to employ counsel to assume the defense of such Proceeding, the fees and expenses of Indemnitee’s counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Nothing herein shall prevent Indemnitee from employing counsel for any such Proceeding at Indemnitee’s expense.

 

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(d) Settlement . The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. Neither the Company nor any Subsidiary or Affiliate shall enter into a settlement of any Proceeding that might result in the imposition of any Expense, Other Liability, penalty, limitation or detriment on Indemnitee, whether indemnifiable under this Agreement or otherwise, without Indemnitee’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent from any settlement of any Proceeding, provided that Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of Indemnitee.

8. Determination of Right to Indemnification .

(a) Success on the Merits or Otherwise . To the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3(a) above or in the defense of any claim, issue or matter described therein, the Company shall indemnify Indemnitee against Expenses actually and reasonably incurred in connection therewith.

(b) Indemnification in Other Situations . In the event that Section 8(a) is inapplicable, the Company shall also indemnify Indemnitee if Indemnitee has not failed to meet the applicable standard of conduct for indemnification.

(c) Forum . Indemnitee shall be entitled to select the forum in which determination of whether or not Indemnitee has met the applicable standard of conduct shall be decided, and such election will be made from among the following:

i. those members of the Board who are non-management directors and are not parties to the Proceeding (“Independent Directors”) even though less than a quorum;

ii. a committee of Independent Directors designated by a majority vote of Independent Directors, even though less than a quorum; or

iii. Independent Counsel selected by Indemnitee and approved by the Board, which approval may not be unreasonably withheld, which counsel shall make such determination in a written opinion.

If Indemnitee is an officer or a director of the Company at the time that Indemnitee is selecting the forum, then Indemnitee shall not select Independent Counsel as such forum unless there are no Independent Directors or unless the Independent Directors agree to the selection of Independent Counsel as the forum.

The selected forum shall be referred to herein as the “Reviewing Party.” Notwithstanding the foregoing, following any Change in Control, the Reviewing Party shall be Independent Counsel selected in the manner provided in Section 8(c)(iii) above.

 

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(d) Decision Timing and Expenses. As soon as practicable, and in no event later than thirty (30) days after receipt by the Company of written notice of Indemnitee’s choice of forum pursuant to Section 8(c) above, the Company and Indemnitee shall each submit to the Reviewing Party such information as they believe is appropriate for the Reviewing Party to consider. The Reviewing Party shall arrive at its decision within a reasonable period of time following the receipt of all such information from the Company and Indemnitee, but in no event later than thirty (30) days following the receipt of all such information. Indemnitee shall cooperate with the Reviewing Party, including providing to the Reviewing Party, upon reasonable advance request, any documentation or information which is not subject to attorney-client privilege or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to the Reviewing Party’s determination. The Reviewing Party shall act reasonably and in good faith in making a determination pursuant to this Section 8. If the Reviewing Party shall not have made a determination within thirty (30) days after the receipt of all such information, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct, provided that the time by which the Reviewing Party must reach a decision may be extended by mutual agreement of the Company and Indemnitee. All Expenses associated with the process set forth in this Section 8(d), including but not limited to the Expenses of the Reviewing Party, shall be paid by the Company.

(e) Delaware Court of Chancery . Notwithstanding a final determination by any Reviewing Party that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, Indemnitee shall have the right to apply to the Court of Chancery, for the purpose of enforcing Indemnitee’s right to indemnification pursuant to this Agreement.

(f) Expenses . The Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee in connection with any submission, hearing or Proceeding under this Section 8 or under Section 6(b) involving Indemnitee and against all Expenses and Other Liabilities incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims of Indemnitee in any such Proceeding was frivolous or not made in good faith.

(g) Determination of “Good Faith.” For purposes of any determination of whether Indemnitee acted in “good faith,” Indemnitee shall be deemed to have acted in good faith if in taking or failing to take the action in question Indemnitee relied on the records or books of account of the Company or a Subsidiary or Affiliate, including financial statements, or on information, opinions, reports or statements provided to Indemnitee by the officers or other employees of the Company or a Subsidiary or Affiliate in the course of their duties, or on the advice of legal counsel for the Company or a Subsidiary or Affiliate, or on information or records given or reports made to the Company or a Subsidiary or Affiliate by an independent certified public accountant or by an appraiser or other expert selected by the Company or a Subsidiary or Affiliate, or by any other person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company or a Subsidiary or Affiliate.

 

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(h) Presumption of Entitlement . In connection with any determination as to whether Indemnitee is entitled to be indemnified hereunder, or to advancement of Expenses, the Reviewing Party, decision maker pursuant to Section 6(b) or court shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification or advancement of Expenses, as the case may be, and the burden of proof shall be on the Company to establish, by clear and convincing evidence, that Indemnitee is not so entitled. In addition, in the event that any Proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such Proceeding with or without payment of money or other consideration), it shall be presumed that Indemnitee has been successful on the merits or otherwise in such Proceeding; anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence. The provisions of this Section 8(h) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failures to act, of any other person serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person shall not be imputed to Indemnitee for purposes of determining the right to indemnification hereunder.

(i) No Other Presumption . For purposes of this Agreement, the termination of any Proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise. In addition, neither the failure of the Company, a Reviewing Party or a decision maker pursuant to Section 6(b) to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Company, a Reviewing Party or a decision maker pursuant to Section 6(b) that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of Proceedings by Indemnitee to secure a judicial determination by exercising Indemnitee’s rights under Section 6(b) or 8(e) of this Agreement shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has failed to meet any particular standard of conduct or did not have any particular belief or is not entitled to indemnification under applicable law or otherwise.

9. Exceptions . Any other provision herein to the contrary notwithstanding,

(a) Claims Initiated by Indemnitee . The Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (i) with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement, any other statute or law, as permitted under Section 145, or otherwise, (ii) where the Board has consented to the initiation of such Proceeding, or (iii) with respect to Proceedings brought to discharge Indemnitee’s fiduciary responsibilities, whether under ERISA or otherwise, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or

(b) Actions Based on Federal Statutes Regarding Profit Recovery and Return of Bonus Payments . The Company shall not be obligated pursuant to the terms of this

 

9


Agreement to indemnify Indemnitee on account of (i) any Proceeding in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Exchange Act and amendments thereto or similar provisions of any federal, state or local statutory law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (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 Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or

(c) Unlawful Indemnification . The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for Other Liabilities if such indemnification is prohibited by law.

10. Non-exclusivity . The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements [(excluding the Prior Agreement)], or otherwise, both as to acts or omissions in his or her official capacity and to acts or omissions in another capacity while serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and shall inure to the benefit of the heirs, executors and administrators of Indemnitee.

11. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves 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 Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. In the event that any court or other adjudicative body shall decline to reform any provision of this Agreement held to be invalid, unenforceable or otherwise illegal as contemplated by the preceding sentence, the parties thereto shall take all such action as may be necessary or appropriate to replace the provision so held to be invalid, unenforceable or otherwise illegal with one or more alternative provisions that effectuate the purpose and intent of the original provisions of this Agreement as fully as possible without being invalid, unenforceable or otherwise illegal.

12. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver

 

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of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) and except as expressly provided herein, no such waiver shall constitute a continuing waiver.

13. Successors .

(a) Successors’ Assumption of Agreement . The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any person acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be deemed the “Company” for purposes of this Agreement), but shall not otherwise be assignable or delegatable by the Company.

(b) Successors and Assigns . The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto.

14. Notice . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (a) if delivered by hand and a receipt is provided by the party to whom such communication is delivered, (b) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the signing by the recipient of an acknowledgement of receipt form accompanying delivery through the U.S. mail, (c) personal service by a process server, or (d) delivery to the recipient’s address by overnight delivery (e.g., FedEx, UPS or DHL) or other commercial delivery service. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice complying with the provisions of this Section 14. Delivery of communications to the Company with respect to this Agreement shall be sent to the attention of the Company’s Chief Financial Officer.

15. Duration of Agreement . All the rights and privileges afforded by the is Agreement, including the right to indemnification and the advancement of legal fees provided under this Agreement, shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity pertaining to an Indemnifiable Event even though Indemnitee may have ceased to serve in such capacity at the time of any Proceeding.

16. Survival of Rights . The rights conferred on Indemnitee by this Agreement shall continue after Indemnitee has ceased to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and shall inure to the benefit of Indemnitee’s heirs, executors and administrators.

17. Subrogation and Contribution .

(a) Except as otherwise expressly provided in this Agreement, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment

 

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to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

(b) 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 Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by or on behalf of 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 Company 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 Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

18. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute Proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.

19. Counterparts . This Agreement may be executed in 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. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

20. Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

21. Governing Law . This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely with Delaware.

22. Consent to Jurisdiction . The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any Proceeding which arises out of or relates to this Agreement.

23. Effective Date . This Agreement shall become effective immediately prior to the date and time on which the Company’s Registration Statement on Form S-1 for its initial public offering is declared effective by the Securities and Exchange Commission (the “ Effective Date ”).

24. Entire Agreement . This Agreement and the documents referred to herein constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and, upon the Effective Date, this Agreement and the documents referred to herein supersede any and all prior understandings and agreements, whether oral or written,

 

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between or among the parties hereto with respect to the specific subject matter hereof[, including, without limitation, the Prior Agreement].

[Remainder of Page Intentionally Left Blank]

 

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The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.

 

ADESTO TECHNOLOGIES CORPORATION

By:

 

 

Name:

 

 

Title:

 

 

INDEMNITEE:

 

Name:

 

 

Address:

 

 

 

 

14

Exhibit 10.03

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

1. PURPOSE . The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents, Subsidiaries and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 28.

2. SHARES SUBJECT TO THE PLAN .

2.1. Number of Shares Available . Subject to Sections 2.6 and 21 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board is that number of reserved shares not issued or subject to outstanding grants under the Company’s 2007 Equity Incentive Plan, as previously amended from time to time, (the “ Prior Plan ”) on the Effective Date (as defined below), plus (a) shares that are subject to stock options or other awards granted under the Prior Plan that cease to be subject to such stock options or other awards by forfeiture or otherwise after the Effective Date, (b) shares issued under the Prior Plan before or after the Effective Date pursuant to the exercise of stock options that are, after the Effective Date, forfeited, (c) shares issued under the Prior Plan that are repurchased by the Company at the original issue price and (d) shares that are subject to stock options or other awards under the Prior Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.

2.2. Lapsed, Returned Awards . Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR; (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price; (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued; or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash or other property rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the exercise price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 shall not include Shares subject to Awards that initially became available because of the substitution clause in Section 21.2 hereof.

2.3. Minimum Share Reserve . At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan.

2.4. Automatic Share Reserve Increase . The number of Shares available for grant and issuance under the Plan shall be increased on January 1, of each of 2016 through 2025, by the lesser of (a) four percent (4%) of the number of Shares issued and outstanding on each December 31 immediately prior to the date of increase or (b) such number of Shares determined by the Board.

2.5. Limitations . No more than 25,000,000 Shares shall be issued pursuant to the exercise of ISOs. No Participant will be eligible to receive more than 2,000,000 Shares in any calendar year under this Plan pursuant to the grant of Awards except that new Employees (including new Employees who are

 

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also officers and directors) are eligible to receive up to a maximum of 4,000,000 Shares in the calendar year in which they commence their employment.

2.6. Adjustment of Shares . If the number of outstanding Shares is changed by a stock dividend, extraordinary dividends or distributions (whether in cash, shares or other property, other than a regular cash dividend), recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, spin off or similar change in the capital structure of the Company, without consideration, then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including Shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and number of Shares subject to outstanding Options and SARs, (c) the number of Shares subject to other outstanding Awards, (d) the maximum number of Shares that may be issued as ISOs set forth in Section 2.5, (e) the maximum number of Shares that may be issued to an individual or to a new Employee in any one calendar year set forth in Section 2.5, and (f) the number of Shares that may be granted as Awards to Non-Employee Directors as set forth in Section 12, shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws; provided that fractions of a Share will not be issued.

3. ELIGIBILITY . ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors and Non-Employee Directors; provided such Consultants, Directors and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.

4. ADMINISTRATION .

4.1. Committee Composition; Authority . This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board shall establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:

(a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;

(b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

(c) select persons to receive Awards;

(d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;

(e) determine the number of Shares or other consideration subject to Awards;

(f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;

 

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(g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary or Affiliate;

(h) grant waivers of Plan or Award conditions;

(i) determine the vesting, exercisability and payment of Awards;

(j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;

(k) determine whether an Award has been earned;

(l) determine the terms and conditions of any, and to institute any Exchange Program;

(m) reduce or waive any criteria with respect to Performance Factors;

(n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships provided that such adjustments are consistent with the regulations promulgated under Section 162(m) of the Code with respect to persons whose compensation is subject to Section 162(m) of the Code;

(o) adopt rules and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States;

(p) make all other determinations necessary or advisable for the administration of this Plan;

(q) delegate any of the foregoing to a subcommittee consisting of one or more executive officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law; and

(r) to exercise negative discretion on Performance Awards, reducing or eliminating the amount to be paid to Participants.

4.2. Committee Interpretation and Discretion . Any determination made by the Committee with respect to any Award shall be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement shall be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the Company and the Participant.

4.3. Section 162(m) of the Code and Section 16 of the Exchange Act . When necessary or desirable for an Award to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee administering the Plan in accordance with the requirements of Rule 16b-3 and Section 162(m) of the Code shall consist of at least two individuals, each of whom qualifies as (a) a Non-Employee Director under Rule 16b-3, and (b) an “outside director” pursuant to Code Section 162(m) and the regulations issued thereunder. At least two (or a majority if more than two then serve on the

 

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Committee) such “outside directors” shall approve the grant of such Award and timely determine (as applicable) the Performance Period and any Performance Factors upon which vesting or settlement of any portion of such Award is to be subject. When required by Section 162(m) of the Code, prior to settlement of any such Award at least two (or a majority if more than two then serve on the Committee) such “outside directors” then serving on the Committee shall determine and certify in writing the extent to which such Performance Factors have been timely achieved and the extent to which the Shares subject to such Award have thereby been earned. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act). With respect to Participants whose compensation is subject to Section 162(m) of the Code, and provided that such adjustments are consistent with the regulations promulgated under Section 162(m) of the Code, the Committee may adjust the performance goals to account for changes in law and accounting and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships, including without limitation (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) a change in accounting standards required by generally accepted accounting principles.

4.4. Documentation . The Award Agreement for a given Award, the Plan and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.

4.5. Foreign Award Recipients . Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries and Affiliates operate or have employees or other individuals eligible for Awards, the Committee, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries and Affiliates shall be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 2.1 hereof; and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.

5. OPTIONS . An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ ISOs ”) or Nonqualified Stock Options (“ NSOs ”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.

5.1. Option Grant . Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.

 

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5.2. Date of Grant . The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.

5.3. Exercise Period . Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option; provided , however , that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary (“ Ten Percent Stockholder ”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.

5.4. Exercise Price . The Exercise Price of an Option will be determined by the Committee when the Option is granted; provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 11 and the Award Agreement and in accordance with any procedures established by the Company.

5.5. Method of Exercise . Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option, and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

5.6. Termination of Service . If the Participant’s Service terminates for any reason except for Cause or the Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates no later than three (3) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond three (3) months after the date Participant’s employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options.

(a) Death . If the Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant’s legal representative, or authorized assignee, no later

 

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than twelve (12) months after the date Participant’s Service terminates (or such shorter time period not less than six (6) months or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options.

(b) Disability . If the Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date Participant’s Service terminates (or such shorter time period not less than six (6) months or longer time period as may be determined by the Committee with any exercise beyond (a) three (3) months after the date Participant’s employment terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code, or (b) twelve (12) months after the date Participant’s employment terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options

(c) Cause . If the Participant is terminated for Cause, then Participant’s Options shall expire on such Participant’s date of termination of Service, or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration date of the Options. Unless otherwise provided in the Award Agreement or an employment agreement, Cause shall have the meaning set forth in the Plan.

5.7. Limitations on Exercise . The Committee may specify a minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent any Participant from exercising the Option for the full number of Shares for which it is then exercisable.

5.8. Limitations on ISOs . With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.8, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

5.9. Modification, Extension or Renewal . The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 18 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants; provided , however , that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.

5.10. No Disqualification . Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.

 

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6. RESTRICTED STOCK AWARDS . A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant, or Director Shares that are subject to restrictions (“ Restricted Stock ”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the Plan.

6.1. Restricted Stock Purchase Agreement . All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer of such Restricted Stock Award will terminate, unless the Committee determines otherwise.

6.2. Purchase Price . The Purchase Price for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan, and the Award Agreement and in accordance with any procedures established by the Company.

6.3. Terms of Restricted Stock Awards . Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.

6.4. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

7. STOCK BONUS AWARDS . A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent, Subsidiary or Affiliate. All Stock Bonus Awards shall be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.

7.1. Terms of Stock Bonus Awards . The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.

 

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7.2. Form of Payment to Participant . Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.

7.3. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

8. STOCK APPRECIATION RIGHTS . A Stock Appreciation Right (“ SAR ”) is an award to an eligible Employee, Consultant, or Director that may be settled in cash, or Shares (which may consist of Restricted Stock), having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs shall be made pursuant to an Award Agreement.

8.1. Terms of SARs . The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed on settlement of the SAR; and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for each SAR; and (y) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.

8.2. Exercise Period and Expiration Date . A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement shall set forth the expiration date; provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.

8.3. Form of Settlement . Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code.

8.4. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

9. RESTRICTED STOCK UNITS . A Restricted Stock Unit (“ RSU ”) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled in cash, or by

 

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issuance of those Shares (which may consist of Restricted Stock). All RSUs shall be made pursuant to an Award Agreement.

9.1. Terms of RSUs . The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU; (b) the time or times during which the RSU may be settled; (c) the consideration to be distributed on settlement; and (d) the effect of the Participant’s termination of Service on each RSU; provided that no RSU shall have a term longer than ten (10) years. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for the RSU; (y) select from among the Performance Factors to be used to measure the performance, if any; and (z) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.

9.2. Form and Timing of Settlement . Payment of earned RSUs shall be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code.

9.3. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

10. PERFORMANCE AWARDS . A Performance Award is an award to an eligible Employee, Consultant, or Director of the Company or any Parent, Subsidiary or Affiliate of a cash bonus or an award of Performance Shares denominated in Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock). Grants of Performance Awards shall be made pursuant to an Award Agreement.

10.1. Types of Performance Awards . Performance Awards shall include Performance Shares, Performance Units, and cash-based Awards as set forth in Sections 10.1(a), 10.1(b), and 10.1(c) below.

(a) Performance Shares . The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares shall consist of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.

(b) Performance Units . The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units shall consist of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.

 

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(c) Cash-Settled Performance Awards . The Committee may also grant cash-settled Performance Awards to Participants under the terms of this Plan. Such awards will be based on the attainment of performance goals using the Performance Criteria within this Plan that are established by the Committee for the relevant performance period.

10.2. Terms of Performance Awards . The Committee will determine, and each Award Agreement shall set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares; (c) the Performance Factors and Performance Period that shall determine the time and extent to which each award of Performance Shares shall be settled; (d) the consideration to be distributed on settlement, and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (x) determine the nature, length and starting date of any Performance Period; (y) select from among the Performance Factors to be used; and (z) determine the number of Shares deemed subject to the award of Performance Shares. Prior to settlement the Committee shall determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria. No Participant will be eligible to receive more than $10,000,000 in Performance Awards in any calendar year under this Plan.

10.3. Termination of Service . Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).

11. PAYMENT FOR SHARE PURCHASES . Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):

(a) by cancellation of indebtedness of the Company to the Participant;

(b) by surrender of Shares held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled;

(c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary of the Company;

(d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;

(e) by any combination of the foregoing; or

(f) by any other method of payment as is permitted by applicable law.

12. GRANTS TO NON-EMPLOYEE DIRECTORS . Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board. The aggregate number of Shares subject to Awards granted to a Non-Employee Director pursuant to this Plan in any calendar year shall not exceed 300,000.

12.1. Eligibility . Awards pursuant to this Section 12 shall be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 12.

 

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12.2. Vesting, Exercisability and Settlement . Except as set forth in Section 21, Awards shall vest, become exercisable and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors shall not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.

12.3. Election to receive Awards in Lieu of Cash . A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, as determined by the Committee. Such Awards shall be issued under the Plan. An election under this Section 12.3 shall be filed with the Company on the form prescribed by the Company.

13. WITHHOLDING TAXES .

13.1. Withholding Generally . Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or a tax event occurs, the Company may require the Participant to remit to the Company, or to the Parent, Subsidiary or applicable Affiliate employing the Participant, an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax requirements or any other tax or social insurance liability legally due from the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax or social insurance requirements or any other tax liability legally due from the Participant. The Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.

13.2. Stock Withholding . The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations of local law, may require or permit a Participant to satisfy such tax withholding obligation or any other tax liability legally due from the Participant, in whole or in part by (without limitation) (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum amount required to be withheld or (d) withholding from proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company for the minimum amount required to be withheld.

14. TRANSFERABILITY .

14.1. Transfer Generally . Unless determined otherwise by the Committee or pursuant to Section 14.2, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards shall be exercisable: (a) during the Participant’s lifetime only by (i) the Participant, or (ii) the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.

14.2. Award Transfer Program . Notwithstanding any contrary provision of the Plan, the Committee shall have all discretion and authority to determine and implement the terms and conditions of any Award Transfer Program instituted pursuant to this Section 14.2 and shall have the authority to amend the terms of any Award participating, or otherwise eligible to participate in, the Award Transfer

 

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Program, including (but not limited to) the authority to (a) amend (including to extend) the expiration date, post-termination exercise period and/or forfeiture conditions of any such Award, (b) amend or remove any provisions of the Award relating to the Award holder’s continued Service to the Company or its Parent, Subsidiary, or Affiliate, (c) amend the permissible payment methods with respect to the exercise or purchase of any such Award, (d) amend the adjustments to be implemented in the event of changes in the capitalization and other similar events with respect to such Award, and (e) make such other changes to the terms of such Award as the Committee deems necessary or appropriate in its sole discretion.

15. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES .

15.1. Voting and Dividends . No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any dividend equivalent rights permitted by an applicable Award Agreement (“ Dividend Equivalent Rights ”). After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided , that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided , further , that the Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Participant’s Purchase Price or Exercise Price, as the case may be, pursuant to Section 15.2. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Shares underlying an Award during the period beginning on the date the Award is granted and ending, with respect to each Share subject to the Award, on the earlier of the date on which the Award is exercised or settled or the date on which it is forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant in the form of additional whole Shares as of the date of payment of such cash dividends on Shares.

15.2. Restrictions on Shares . At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “ Right of Repurchase ”) a portion of any or all Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.

16. CERTIFICATES . All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.

17. ESCROW; PLEDGE OF SHARES . To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note; provided , however , that the Committee may

 

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require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.

18. REPRICING; EXCHANGE AND BUYOUT OF AWARDS . Without prior stockholder approval, the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.9 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.

19. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE . An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any foreign or state securities laws, exchange control laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

20. NO OBLIGATION TO EMPLOY . Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate to terminate Participant’s employment or other relationship at any time.

21. CORPORATE TRANSACTIONS .

21.1. Assumption or Replacement of Awards by Successor . In the event that the Company is subject to a Corporate Transaction, outstanding Awards acquired under the Plan shall be subject to the agreement evidencing the Corporate Transaction, which need not treat all outstanding Awards in an identical manner. Such agreement, without the Participant’s consent, shall provide for one or more of the following with respect to all outstanding Awards as of the effective date of such Corporate Transaction:

(a) The continuation of an outstanding Award by the Company (if the Company is the successor entity).

(b) The assumption of an outstanding Award by the successor or acquiring entity (if any) of such Corporate Transaction (or by its parents, if any), which assumption, will be binding on all selected Participants; provided that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code.

 

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(c) The substitution by the successor or acquiring entity in such Corporate Transaction (or by its parents, if any) of equivalent awards with substantially the same terms for such outstanding Awards (except that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code).

(d) The full or partial acceleration of exercisability or vesting and accelerated expiration of an outstanding Award and lapse of the Company’s right to repurchase or re-acquire shares acquired under an Award or lapse of forfeiture rights with respect to shares acquired under an Award.

(e) The settlement of the full value of such outstanding Award (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a Fair Market Value equal to the required amount, followed by the cancellation of such Awards; provided however, that such Award may be cancelled if such Award has no value, as determined by the Committee, in its discretion. Subject to Section 409A of the Code where applicable to such Award, such payment may be made in installments and may be deferred until the date or dates the Award would have become exercisable or vested. Such payment may be subject to vesting based on the Participant’s continued service, provided that the vesting schedule shall not be less favorable to the Participant than the schedule under which the Award would have become vested or exercisable. For purposes of this Section 21.1(e), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to such security.

(f) The cancellation of outstanding Awards in exchange for no consideration.

The Board shall have full power and authority to assign the Company’s right to repurchase or re-acquire or forfeiture rights to such successor or acquiring corporation. In addition, in the event such successor or acquiring corporation refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Award will be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly in a Corporate Transaction.

21.2. Assumption of Awards by the Company . The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged ( except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards shall not be credited toward the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.

21.3. Non-Employee Directors’ Awards . Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors shall accelerate and such Awards shall become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.

 

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22. ADOPTION AND STOCKHOLDER APPROVAL . This Plan shall be submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.

23. TERM OF PLAN/GOVERNING LAW . Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of law rules).

24. AMENDMENT OR TERMINATION OF PLAN . The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided , however , that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval; provided further , that a Participant’s Award shall be governed by the version of this Plan then in effect at the time such Award was granted.

25. NONEXCLUSIVITY OF THE PLAN . Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

26. INSIDER TRADING POLICY . Each Participant who receives an Award shall comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or directors of the Company.

27. ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY . All Awards shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.

28. DEFINITIONS . As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:

28.1. Affiliate ” means any person or entity that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, including any general partner, managing member, officer or director of the Company, in each case as of the date on which, or at any time during the period for which, the determination of affiliation is being made. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such person or entity, whether through the ownership of voting securities or by contract or otherwise.

28.2. Award ” means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right, Restricted Stock Unit or award of Performance Shares.

28.3. Award Agreement ” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which shall be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award

 

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agreements that are not used for Insiders, the Committee’s delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.

28.4. Award Transfer Program ” means any program instituted by the Committee which would permit Participants the opportunity to transfer any outstanding Awards to a financial institution or other person or entity approved by the Committee.

28.5. Board ” means the Board of Directors of the Company.

28.6. Cause ” means (i) any willful, material violation by the Participant of any law or regulation applicable to the business of the Company or a Parent or Subsidiary of the Company, the Participant’s conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration by the Participant of a common law fraud, (ii) the Participant’s commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company, (iii) any material breach by the Participant of any provision of any agreement or understanding between the Company or any Parent or Subsidiary of the Company and the Participant regarding the terms of the Participant’s service as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company, including without limitation, the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an employee, officer, director or consultant of the Company or a Parent or Subsidiary of the Company, other than as a result of having a Disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company or a Parent or Subsidiary of the Company and the Participant, (iv) Participant’s disregard of the policies of the Company or any Parent or Subsidiary of the Company so as to cause loss, damage or injury to the property, reputation or employees of the Company or a Parent or Subsidiary of the Company, or (v) any other misconduct by the Participant which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or a Parent or Subsidiary of the Company. The determination as to whether a Participant is being terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time as provided in Section 20 above, and the term “Company” will be interpreted to include any Parent, Subsidiary or Affiliate, as appropriate. Notwithstanding the foregoing, the foregoing definition of “Cause” may, in part or in whole, be modified or replaced in each individual employment agreement or Award Agreement with any Participant, provided that such document supersedes the definition provided in this Section 28.6.

28.7. Code ” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

28.8. Committee ” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.

28.9. Common Stock ” means the common stock of the Company.

28.10. Company ” means Adesto Technologies Corporation, or any successor corporation.

28.11. Consultant ” means any person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity.

28.12. Corporate Transaction ” means the occurrence of any of the following events: (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; provided, however, that for purposes of this subclause (a)

 

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the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; (d) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company) or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount shall become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.

28.13. Director ” means a member of the Board.

28.14. Disability ” means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

28.15. Effective Date ” means the day immediately prior to the date of the underwritten initial public offering of the Company’s Common Stock pursuant to a registration statement that is declared effective by the SEC.

28.16. Employee ” means any person, including Officers and Directors, employed by the Company or any Parent, Subsidiary or Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

28.17. Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.

28.18. Exchange Program ” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled or exchanged for cash, the same type of Award or a different Award (or combination thereof) or (b) the exercise price of an outstanding Award is increased or reduced.

28.19. Exercise Price ” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.

 

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28.20. Fair Market Value ” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

(a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(c) in the case of an Option or SAR grant made on the Effective Date, the price per share at which shares of the Company’s Common Stock are initially offered for sale to the public by the Company’s underwriters in the initial public offering of the Company’s Common Stock pursuant to a registration statement filed with the SEC under the Securities Act; or

(d) if none of the foregoing is applicable, by the Board or the Committee in good faith.

28.21. Insider ” means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

28.22. IRS ” means the United States Internal Revenue Service.

28.23. Non-Employee Director ” means a Director who is not an Employee of the Company or any Parent, Subsidiary or Affiliate.

28.24. Option ” means an award of an option to purchase Shares pursuant to Section 5.

28.25. Parent ” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such 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.

28.26. Participant ” means a person who holds an Award under this Plan.

28.27. Performance Award means cash or Shares granted pursuant to Section 10 or Section 12 of the Plan.

28.28. “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following objective measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:

(a) Profit Before Tax;

(b) Sales;

(c) Expenses;

 

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(d) Billings;

(e) Revenue;

(f) Net revenue;

(g) Earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings, stock-based compensation expenses, depreciation and amortization);

(h) Operating income;

(i) Operating margin;

(j) Operating profit;

(k) Controllable operating profit, or net operating profit;

(l) Net Profit;

(m) Gross margin;

(n) Operating expenses or operating expenses as a percentage of revenue;

(o) Net income;

(p) Earnings per share;

(q) Total stockholder return;

(r) Market share;

(s) Return on assets or net assets;

(t) The Company’s stock price;

(u) Growth in stockholder value relative to a pre-determined index;

(v) Return on equity;

(w) Return on invested capital;

(x) Cash Flow (including free cash flow or operating cash flows)

(y) Balance of cash, cash equivalents and marketable securities;

(z) Cash conversion cycle;

(aa) Economic value added;

(bb) Individual confidential business objectives;

(cc) Contract awards or backlog;

(dd) Overhead or other expense reduction;

 

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(ee) Credit rating;

(ff) Completion of an identified special project;

(gg) Completion of a joint venture or other corporate transaction;

(hh) Strategic plan development and implementation;

(ii) Succession plan development and implementation;

(jj) Improvement in workforce diversity;

(kk) Employee satisfaction;

(ll) Employee retention;

(mm) Customer indicators and satisfaction;

(nn) New product invention or innovation;

(oo) Research and development expenses;

(pp) Attainment of research and development milestones;

(qq) Improvements in productivity;

(rr) Bookings;

(ss) Working-capital targets and changes in working capital; and

(tt) Attainment of objective operating goals and employee metrics.

The Committee may, in recognition of unusual or non-recurring items such as acquisition-related activities or changes in applicable accounting rules, provide for one or more equitable adjustments (based on objective standards) to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.

28.29. Performance Period ” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Factors will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award.

28.30. Performance Share ” means an Award granted pursuant to Section 10 or Section 12 of the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.

28.31. Performance Unit” means a right granted to a Participant pursuant to Section 10 or Section 12, to receive Stock, the payment of which is contingent upon achieving certain performance goals established by the Committee”

28.32. Permitted Transferee ” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,

 

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daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.

28.33. Plan ” means this Adesto Technologies Corporation 2015 Equity Incentive Plan.

28.34. Purchase Price ” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.

28.35. Restricted Stock Award ” means an award of Shares pursuant to Section 6 or Section 12 of the Plan, or issued pursuant to the early exercise of an Option.

28.36. Restricted Stock Unit ” means an Award granted pursuant to Section 9 or Section 12 of the Plan.

28.37. SEC ” means the United States Securities and Exchange Commission.

28.38. Securities Act ” means the United States Securities Act of 1933, as amended.

28.39. Service ” shall mean service as an Employee, Consultant, Director or Non-Employee Director, to the Company or a Parent, Subsidiary or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence approved by the Company; provided , that such leave is for a period of not more than 90 days (x) unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or (y) unless provided otherwise pursuant to formal policy adopted from time to time by the Company’s Board and issued and promulgated to employees in writing. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification to vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military leave, if required by applicable laws, vesting shall continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide Service to the Company throughout the leave on the same terms as he or she was providing Service immediately prior to such leave. An employee shall have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment shall not be extended by any notice period or garden leave mandated by local law, provided however , that a change in status from an employee to a consultant or advisor shall not terminate the service provider’s Service, unless determined by the Committee, in its discretion. The Committee will have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service.

28.40. Shares ” means shares of Common Stock and the common stock of any successor entity.

28.41. Stock Appreciation Right ” means an Award granted pursuant to Section 8 or Section 12 of the Plan.

 

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28.42. Stock Bonus ” means an Award granted pursuant to Section 7 or Section 12 of the Plan.

28.43. 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.

28.44. Treasury Regulations ” means regulations promulgated by the United States Treasury Department.

28.45. Unvested Shares ” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).

 

22


NOTICE OF STOCK OPTION GRANT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this Notice of Stock Option Grant (this “ Notice of Grant ”) and the attached Stock Option Agreement (the “ Agreement ”). You have been granted an option (the “ Option ”) to purchase shares of common stock of the Company (“ Common Stock ”) under the Plan subject to the terms and conditions of the Plan, this Notice of Grant and the Agreement.

 

Name:   

 

Address:   

 

Date of Grant:   

 

Vesting Commencement Date:   

 

Exercise Price per Share:   

 

Total Number of Shares:   

 

Type of Option:                 Incentive Stock Option
                Non-Qualified Stock Option
Expiration Date:                     , 20    ; This Option expires earlier if your Service terminates earlier, as described in the Agreement.
Vesting Schedule:    Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE]
Additional Terms:    ¨   If this box is checked, the additional terms and conditions set forth on Attachment 1 hereto (as executed by the Company) are applicable and are incorporated herein by reference. No document need be attached as Attachment 1 if this box is not checked.

By accepting this Option, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan, this Notice of Grant and the Agreement. By accepting this Option, you consent to electronic delivery as set forth in the Agreement.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 

 

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STOCK OPTION AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted an option by Adesto Technologies Corporation (the “ Company ”) under the 2015 Equity Incentive Plan (the “ Plan ”) to purchase Shares (the “ Option ”), subject to the terms, restrictions and conditions of the Plan, the Notice of Stock Option Grant (the “ Notice of Grant ”) and this Stock Option Agreement (this “ Agreement ”).

1. Grant of Option . You have been granted an Option for the number of Shares set forth in the Notice of Grant at the exercise price per Share set forth in the Notice of Grant (the “ Exercise Price Per Share ”). In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. If designated in the Notice of Grant as an Incentive Stock Option (“ ISO ”), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”). However, if this Option is intended to be an ISO, to the extent that it exceeds the $100,000 rule of Section 422(d) of the Code it shall be treated as a Nonqualified Stock Option (“ NSO ”).

2. Termination Period .

(a) General Rule . If your Service terminates for any reason except death or Disability, and other than for Cause, then this Option will expire at the close of business at Company headquarters on the date three months after your termination of Service (subject to the expiration detailed in Section 6). If your Service is terminated for Cause, this Option will expire upon the date of such termination. The Company determines when your Service terminates for all purposes under this Agreement. You acknowledge and agree that the Vesting Schedule may change prospectively in the event that your service status changes between full and part-time status in accordance with Company policies relating to work schedules and vesting of awards. You acknowledge that the vesting of the Shares pursuant to this Notice is earned only by continuing Service.

(b) Death; Disability . If you die before your Service terminates (or you die within three months of your termination of Service other than for Cause), then this Option will expire at the close of business at Company headquarters on the date 12 months after the date of death (subject to the expiration detailed in Section 6). If your Service terminates because of your Disability, then this Option will expire at the close of business at Company headquarters on the date 12 months after your termination date (subject to the expiration detailed in Section 6).

(c) No Notice . You are responsible for keeping track of these exercise periods following your termination of Service for any reason. The Company will not provide further notice of such periods. In no event shall this Option be exercised later than the Expiration Date set forth in the Notice of Grant.

3. Exercise of Option .

(a) Right to Exercise . This Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and this Agreement. In the event of your death, Disability, or other cessation of Service, the exercisability of the Option is governed by the applicable provisions of the Plan, the Notice of Grant and this Agreement. This Option may not be exercised for a fraction of a Share.

(b) Method of Exercise . This Option is exercisable by delivery of an exercise notice in a form specified by the Company (the “ Exercise Notice ”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “ Exercised Shares ”), and such other representations and agreements as may be required by the Company pursuant to the

 

24


provisions of the Plan. The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price per Share as to all Exercised Shares (the “ Exercise Price ”). This Option shall be deemed to be exercised upon receipt by the Company of a fully executed Exercise Notice accompanied by the Exercise Price and any applicable tax withholding due upon exercise of the Option.

(c) Exercise by Another . If another person wants to exercise this Option after it has been transferred to him or her in compliance with this Agreement, that person must prove to the Company’s satisfaction that he or she is entitled to exercise this Option. That person must also complete the proper Exercise Notice form (as described above) and pay the Exercise Price (as described below) and any applicable tax withholding due upon exercise of the Option (as described below).

4. Method of Payment . Payment of the Exercise Price shall be by any of the following, or a combination thereof, at your election:

(a) your personal check, wire transfer, or a cashier’s check;

(b) certificates for shares of Company stock 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 Exercise Price. Instead of surrendering shares of Company stock, 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 Option shares issued to you. However, you may not surrender, or attest to the ownership of, shares of Company stock in payment of the Exercise Price of your Option if your action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes;

(c) cashless exercise through irrevocable directions to a securities broker approved by the Company to sell all or part of the Shares covered by this Option and to deliver to the Company from the sale proceeds an amount sufficient to pay the 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 signing a special notice of exercise form provided by the Company; or

(d) other method authorized by the Company.

5. Non-Transferability of Option . In general, except as provided below, only you may exercise this Option prior to your death. You may not transfer or assign this Option, except as provided below. 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 or in a beneficiary designation. However, if this Option is designated as a NSO in the Notice of Grant, then the Committee (as defined in the Plan) may, in its sole discretion, allow you to transfer this Option as a gift to one or more family 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 NSO in the Notice of 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. This Option may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during your lifetime only by you unless otherwise permitted in the Plan. The terms of

 

25


the Plan and this Agreement shall be binding upon your executors, administrators, heirs, successors and assigns.

6. Term of Option . This Option shall in any event expire on the expiration date set forth in the Notice of Grant, which date is 10 years after the Date of Grant (five years after the Date of Grant if this Option is designated as an ISO in the Notice of Grant and Section 5.3 of the Plan applies).

7. Tax Consequences . YOU SHOULD CONSULT A TAX ADVISER IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES ACQUIRED PURSUANT TO THIS OPTION.

(a) Exercising the Option . You will not be allowed to exercise this Option unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the Option exercise.

(b) Notice of Disqualifying Disposition of ISO Shares . 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. You agree that you may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current compensation paid to you.

8. 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, 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 reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

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 and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. 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. 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. Finally, you

 

26


acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

9. Acknowledgement . The Company and you agree that the Option is granted under and governed by the Notice of Grant, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the Option subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and this Agreement.

10. Consent to Electronic Delivery of All Plan Documents and Disclosures . By your acceptance of this Option, you consent to the electronic delivery of the Notice of Grant, this Agreement, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Option. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

11. Compliance with Laws and Regulations . The exercise of this Option will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Common Stock may be listed or quoted at the time of such issuance or transfer, which compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

12. Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice or this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in Santa

 

27


Clara County or the federal courts of the United States for the Northern District of California and no other courts.

13. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

14. Adjustment . In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Shares covered by this Option and the Exercise Price per Share may be adjusted pursuant to the Plan.

15. Lock-Up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing any underwritten offering of the Company’s securities, you hereby agree not to sell, make any short sale of, loan, grant any Option for the purchase of, or otherwise dispose of any securities of the Company however and whenever acquired (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering; provided however that, if during the last seventeen (17) days of the restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the restricted period, then, upon the request of the managing underwriter, to the extent required by any FINRA rules, the restrictions imposed by this Section shall continue to apply until the end of the third trading day following the expiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In no event will the restricted period extend beyond two hundred sixteen (216) days after the effective date of the registration statement.

16. Award Subject to Company Clawback or Recoupment . To the extent permitted by applicable law, the Option shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Option (whether vested or unvested) and the recoupment of any gains realized with respect to your Option.

17. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice of Grant constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning this Option are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

BY ACCEPTING THIS OPTION, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

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INTERNATIONAL NOTICE OF STOCK OPTION GRANT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this International Notice of Stock Option Grant (this “ Notice of Grant ”) and the attached International Stock Option Agreement (including any special terms and conditions for your country set forth in the appendix attached thereto (the “ Appendix ”) (collectively, the “ Agreement ”)). You have been granted an option (the “ Option ”) to purchase shares of common stock of the Company (“ Common Stock ”) under the Plan subject to the terms and conditions of the Plan, this Notice of Grant and the Agreement.

 

Name:  

 

 

Address:

 

 

 

Date of Grant:  

 

 

Vesting Commencement Date:  

 

 
Exercise Price per Share:  

 

 
Total Number of Shares:  

 

 

 

Type of Option:                 Incentive Stock Option
                Non-Qualified Stock Option

Expiration Date :                  , 20    ; This Option expires earlier if your Service terminates earlier, as described in the Agreement.

Vesting Schedule : Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE]

Additional Terms :     ¨   If this box is checked, the additional terms and conditions set forth on Attachment 1 hereto (as executed by the Company) are applicable and are incorporated herein by reference. No document need be attached as Attachment 1 if this box is not checked.

By accepting this Option, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan, this Notice of Grant and the Agreement. By accepting this Option, you consent to electronic delivery as set forth in the Agreement.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 


INTERNATIONAL STOCK OPTION AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted an option by Adesto Technologies Corporation (the “ Company ”) under the 2015 Equity Incentive Plan (the “ Plan ”) to purchase Shares (the “ Option ”), subject to the terms, restrictions and conditions of the Plan, the International Notice of Stock Option Grant (the “ Notice of Grant ”) and this International Stock Option Agreement (including any special terms and conditions for your country set forth in the appendix attached hereto (the “ Appendix ”) (collectively, this “ Agreement ”).

1. Grant of Option . You have been granted an Option for the number of Shares set forth in the Notice of Grant at the exercise price per Share set forth in the Notice of Grant (the “ Exercise Price Per Share ”). In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. If designated in the Notice of Grant as an Incentive Stock Option (“ ISO ”), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”). However, if this Option is intended to be an ISO, to the extent that it exceeds the $100,000 rule of Section 422(d) of the Code it shall be treated as a Nonqualified Stock Option (“ NSO ”).

2. Termination Period .

(a) General Rule . If your Service terminates for any reason except death or Disability, and other than for Cause, then this Option will expire at the close of business at Company headquarters on the date three months after your termination of Service (subject to the expiration detailed in Section 6). If your Service is terminated for Cause, this Option will expire upon the date of such termination. The Company determines when your Service terminates for all purposes under this Agreement. You acknowledge and agree that the Vesting Schedule may change prospectively in the event that your service status changes between full and part-time status in accordance with Company policies relating to work schedules and vesting of awards. You acknowledge that the vesting of the Shares pursuant to this Notice is earned only by continuing Service.

(b) Death; Disability . If you die before your Service terminates (or you die within three months of your termination of Service other than for Cause), then this Option will expire at the close of business at Company headquarters on the date 12 months after the date of death (subject to the expiration detailed in Section 6). If your Service terminates because of your Disability, then this Option will expire at the close of business at Company headquarters on the date 12 months after your termination date (subject to the expiration detailed in Section 6).

(c) No Notice . You are responsible for keeping track of these exercise periods following your termination of Service for any reason. The Company will not provide further notice of such periods. In no event shall this Option be exercised later than the Expiration Date set forth in the Notice of Grant.

3. Exercise of Option .

(a) Right to Exercise . This Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and this Agreement. In the event of your death, Disability, or other cessation of Service, the exercisability of the Option is governed by the applicable provisions of the Plan, the Notice of Grant and this Agreement. This Option may not be exercised for a fraction of a Share.

(b) Method of Exercise . This Option is exercisable by delivery of an exercise notice in a form specified by the Company (the “ Exercise Notice ”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “ Exercised Shares ”),

 

1


and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price per Share as to all Exercised Shares (the “ Exercise Price ”). This Option shall be deemed to be exercised upon receipt by the Company of a fully executed Exercise Notice accompanied by the Exercise Price and any applicable tax withholding due upon exercise of the Option.

(c) Exercise by Another . If another person wants to exercise this Option after it has been transferred to him or her in compliance with this Agreement, that person must prove to the Company’s satisfaction that he or she is entitled to exercise this Option. That person must also complete the proper Exercise Notice form (as described above) and pay the Exercise Price (as described below) and any applicable tax withholding due upon exercise of the Option (as described below).

4. Method of Payment . Payment of the Exercise Price shall be by any of the following, or a combination thereof, at your election:

(a) your personal check, wire transfer, or a cashier’s check;

(b) for U.S. taxpayers only: certificates for shares of Company stock 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 Exercise Price. Instead of surrendering shares of Company stock, 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 Option shares issued to you. However, you may not surrender, or attest to the ownership of, shares of Company stock in payment of the Exercise Price of your Option if your action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes;

(c) cashless exercise through irrevocable directions to a securities broker approved by the Company to sell all or part of the Shares covered by this Option and to deliver to the Company from the sale proceeds an amount sufficient to pay the 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 signing a special notice of exercise form provided by the Company; or

(d) other method authorized by the Company.

5. Non-Transferability of Option . In general, except as provided below, only you may exercise this Option prior to your death. You may not transfer or assign this Option, except as provided below. 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. However, if you are a U.S. taxpayer, you may dispose of this Option in your will or in a beneficiary designation. If you are a U.S. taxpayer and this Option is designated as a NSO in the Notice of Grant, then the Committee (as defined in the Plan) may, in its sole discretion, allow you to transfer this Option as a gift to one or more family 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 you are a U.S. taxpayer and this Option is designated as a NSO in the Notice of 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

 

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transferee(s) to be bound by this Agreement. This Option may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during your lifetime only by you unless otherwise permitted in the Plan. The terms of the Plan and this Agreement shall be binding upon your executors, administrators, heirs, successors and assigns.

6. Term of Option . This Option shall in any event expire on the expiration date set forth in the Notice of Grant, which date is 10 years after the Date of Grant (five years after the Date of Grant if this Option is designated as an ISO in the Notice of Grant and Section 5.3 of the Plan applies).

7. Tax Consequences . YOU SHOULD CONSULT A TAX ADVISER IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES ACQUIRED PURSUANT TO THIS OPTION.

(a) Exercising the Option . You will not be allowed to exercise this Option unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the Option exercise.

(b) Notice of Disqualifying Disposition of ISO Shares . 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. You agree that you may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current compensation paid to you.

8. 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, 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 reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

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 and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. 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. You shall pay to the Company or the Employer any amount of Tax-Related Items that

 

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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. Finally, you acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

9. Nature of Grant . In accepting this Option, you acknowledge, understand and agree that:

(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b) the grant of this Option is voluntary and occasional and does not create any contractual or other right to receive future grants of stock options, or benefits in lieu of stock options, even if stock options have been granted in the past;

(c) all decisions with respect to future stock options or other grants, if any, will be at the sole discretion of the Company;

(d) you are voluntarily participating in the Plan;

(e) this Option and any Shares acquired under the Plan, and the income and value of same, are not intended to replace any pension rights or compensation;

(f) this Option and any Shares acquired under the Plan, and the income and value of same, are not part of normal or expected compensation for purpose of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or payments or welfare benefits or similar payments;

(g) unless otherwise agreed with the Company, this Option and any Shares acquired under the Plan, and the income and value of same, are not granted as consideration for, or in connection with, any Service you may provide as a director of any Parent, Subsidiary or Affiliate;

(h) the future value of the Shares underlying this Option is unknown, indeterminable, and cannot be predicted with certainty;

(i) if the underlying Shares do not increase in value, this Option will have no value;

(j) if you exercise this Option and acquire Shares, the value of such Shares may increase or decrease in value, even below the Exercise Price;

(k) no claim or entitlement to compensation or damages shall arise from forfeiture of this Option resulting from the termination of your Service (for any reason whatsoever, whether or not later found to be invalid or in breach of labor laws in the jurisdiction where you are employed or engaged or the terms of your employment or service agreement, if any), and in consideration of the grant of this Option to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company, the Employer or any Parent, Subsidiary or Affiliate, waive your ability, if any, to bring any such claim, and release the Company, the Employer or any Parent, Subsidiary or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and

(l) if you are providing Service outside the United States, neither the Employer, the Company nor any Parent, Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of this Option or of

 

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any amounts due to you pursuant to the exercise of this Option or the subsequent sale of any Shares acquired upon exercise.

10. Data Privacy . You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and any Parent, Subsidiary or Affiliate for the exclusive purpose of implementing, administering and managing your participation in the Plan.

You understand that the Company and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares or directorships held in the Company, details of all stock options or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (“ Data ”), for the exclusive purpose of implementing, administering and managing the Plan.

You understand that Data will be transferred to third parties in connection with the implementation, administration and management of the Plan. You understand that the recipients of Data may be located in the United States or elsewhere, and that the recipient’s country ( e.g. , the United States) may have different data privacy laws and protections than your country. You understand that if you reside outside the United States, he or she may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purposes of implementing, administering and managing your participation in the Plan. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understands that if you reside outside the United States, you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. Further, you understand that you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your Service status and career with the Employer will not be adversely affected; the only consequence of refusing or withdrawing your consent is that Company would not be able to grant you stock options or other equity awards or administer or maintain such awards. Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

11. Acknowledgement . The Company and you agree that the Option is granted under and governed by the Notice of Grant, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the Option subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and this Agreement.

12. Consent to Electronic Delivery of All Plan Documents and Disclosures . By your acceptance of this Option, you consent to the electronic delivery of the Notice of Grant, this Agreement, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Option. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You

 

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acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

13. Compliance with Laws and Regulations . The exercise of this Option will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Common Stock may be listed or quoted at the time of such issuance or transfer, which compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

14. Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice or this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.

15. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

16. Adjustment . In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Shares covered by this Option and the Exercise Price per Share may be adjusted pursuant to the Plan.

17. Lock-Up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing any underwritten offering of the Company’s securities, you hereby agree not to sell, make any short sale of, loan, grant any Option for the purchase of, or otherwise dispose of any securities of the Company however and whenever acquired (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the Company or such managing

 

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underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering; provided however that, if during the last seventeen (17) days of the restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the restricted period, then, upon the request of the managing underwriter, to the extent required by any FINRA rules, the restrictions imposed by this Section shall continue to apply until the end of the third trading day following the expiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In no event will the restricted period extend beyond two hundred sixteen (216) days after the effective date of the registration statement.

18. Award Subject to Company Clawback or Recoupment . To the extent permitted by applicable law, the Option shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Option (whether vested or unvested) and the recoupment of any gains realized with respect to your Option.

19. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice of Grant constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning this Option are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

20. Insider Trading Restrictions/Market Abuse Laws . You acknowledge that you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell the Shares or rights to Shares under the Plan during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you are advised to speak to your personal advisor on this matter.

21. Language . If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control, except as required by local law.

22. Appendix . Notwithstanding any provisions in this Agreement, this Option shall be subject to any special terms and conditions set forth in any Appendix hereto for your country. Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.

BY ACCEPTING THIS OPTION, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

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APPENDIX

ADDITIONAL TERMS AND CONDITIONS

INTERNATIONAL STOCK OPTION AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Capitalized terms, unless explicitly defined in this Appendix, shall have the meanings given to them in the International Stock Option Agreement, the Notice of Grant or in the Plan.

Terms and Conditions

This Appendix includes special terms and conditions that govern this Option if you reside and/or work in one of the countries listed below. If you are a citizen or resident (or are considered as such for local law purposes) of a country other than the country in which you are currently residing and/or working, or if you transfer to another country after receiving this Option, the Company shall, in its discretion, determine to what extent the special terms and conditions contained herein shall be applicable to you.

Notifications

This Appendix also includes information regarding securities, exchange control, tax and certain other issues of which you should be aware with respect to your participation in the Plan. The information is based on the securities, exchange control, tax and other laws in effect in the respective countries as of May 2015. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information contained herein as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you exercise this Option or at the time you sell any Shares acquired under the Plan. In addition, the information is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of any particular result. Therefore, you are advised to seek appropriate professional advice as to how the relevant laws in your country may apply to your individual situation.

If you are a citizen or resident (or are considered as such for local tax purposes) of a country other than the country in which you are currently residing and/or working, or if you transfer to another country after the grant of this Option, the information contained herein may not be applicable to you in the same manner.

 

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AUSTRALIA

Terms and Conditions

Breach of Law . Notwithstanding anything to the contrary in the Plan or the International Stock Option Agreement, you will not be entitled to, and shall not claim any benefit (including without limitation a legal right) under the Plan if the provision of such benefit would give rise to a breach of Part 2D.2 of the Corporations Act 2001 (Cth), any other provision of that Act, or any other applicable statute, rule or regulation which limits or restricts the giving of such benefits. Further, the Employer is under no obligation to seek or obtain the approval of its stockholders in a general meeting for the purpose of overcoming any such limitation or restriction.

Notifications

Securities Law Information . If you acquire Shares under the Plan and offer such Shares for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. You should obtain legal advice regarding the disclosure obligations prior to making any such offer.

Exchange Control Information . Exchange control reporting is required for cash transactions exceeding AUD10,000 and for international fund transfers. If an Australian bank is assisting with the transaction, the bank will file the report on your behalf.

BELARUS

Terms and Conditions

Exercise of Option . The following provision supplements Sections 3 and 4 of the International Stock Option Agreement:

Unless otherwise determined by the Committee, to exercise this Option, you must pay the Exercise Price by a cashless sell-all exercise method using a licensed securities broker acceptable to the Company, such that all Exercised Shares will be sold immediately upon exercise ( i.e. , a “same day sale”) and the proceeds of sale, less the Exercise Price, any Tax-Related Items withholding and broker’s fees and commissions, will be remitted to you. You shall not be permitted to hold Shares following the exercise of this Option. In the event that your Service terminates, the unvested portion of this Option will be forfeited and you must exercise the vested portion of this Option within such time set forth in the Notice of Grant and the Agreement.

Exchange Control Acknowledgement . You agree to comply with any exchange control requirements arising out of the exercise of this Option and the sale of Shares, including any requirement to obtain a permit from the National Bank of the Republic of Belarus (the “ National Bank ”) to exercise this Option. To obtain the permit, you may be required to submit certain documents to the National Bank, including: (i) an application in a prescribed form; (ii) a copy of a personal identification document; (iii) information on the Shares to be acquired ( e.g. , type, number, par value, name of the issuer); and (iv) a copy of the Agreement.

Please note that exchange control regulations in Belarus are subject to change. You should consult with your personal legal advisor regarding any exchange control obligations that you may have prior to exercising this Option or receiving proceeds from the sale of Shares acquired under the Plan.

 

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BRAZIL

Terms and Conditions

Compliance with Law . By accepting this Option, you acknowledge your agreement to comply with applicable Brazilian laws and to pay any and all applicable Tax-Related Items associated with this Option, the sale of Shares acquired under the Plan and the receipt of any dividends.

Notifications

Exchange Control Information . Brazilian residents are required to submit an annual declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Shares acquired under the Plan.

Tax on Financial Transaction (IOF) . Payments to foreign countries (including the payment of the Exercise Price) and repatriation of funds into Brazil and the conversion of BRL to USD associated with such fund transfers may be subject to the Tax on Financial Transactions. It is your responsibility to comply with any applicable Tax on Financial Transactions arising from your participation in the Plan.

CANADA

Terms and Conditions

Method of Payment . The following provision supplements Section 4 of the International Stock Option Agreement:

Due to regulatory considerations in Canada, you are prohibited from surrendering Shares that you already own or attesting to the ownership of Shares to pay the Exercise Price or any Tax-Related Items in connection with this Option.

Termination Date . The following provisions replace Section 2(c) of the International Stock Option Agreement in its entirety:

For purposes of this Option, your Service will be considered terminated as of the date that is the earliest of (i) the date on which your Service is terminated, (ii) the date on which you receive notice of termination of your Service, and (iii) the date on which you are no longer actively providing Services to the Company or the Employer, regardless of any notice period or period of pay in lieu of such notice required under applicable employment law. The Committee shall have the exclusive discretion to determine when your active provision of services is terminated for purposes of this Option (including whether you may still be considered actively employed while on a leave of absence).

The following terms and conditions apply if you are a Quebec resident :

Language . The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Les parties reconnaissent avoir expressement souhaité que la convention [“Agreement”], ainsi que tous les documents, avis et procédures judiciaries, éxecutés, donnés ou intentés en vertu de, ou lié, directement ou indirectement à la présente convention, soient rédigés en langue anglaise.

Data Privacy . You hereby authorize the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. You further authorize the Company and any Subsidiary or Affiliate and the

 

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Committee to disclose and discuss the Plan with their advisors and to record all relevant information and keep such information in your employee file.

Notifications

Foreign Asset/Account Reporting Information . Canadian residents are required to report to the tax authorities any foreign property held outside of Canada (including this Option, Shares) on form T1135 (Foreign Income Verification Statement) if the total cost of such foreign property exceeds C$100,000 at any time during the calendar year. The unvested portion of this Option also must be reported (generally at nil cost) on Form 1135 if the C$100,000 threshold is exceeded due to other foreign property you hold. The Form T1135 must be filed at the same time you file your annual tax return. You should consult your personal legal advisor to ensure compliance with applicable reporting obligations.

CHINA

Terms and Conditions

The following terms and conditions apply to you only if you are subject to the exchange control restrictions and regulations in China, including the requirements imposed by the State Administration of Foreign Exchange (“ SAFE ”), as determined by the Company in its sole discretion.

Exercise of Option . The following provisions supplement Section 3 of the International Stock Option Agreement:

Notwithstanding any provision of the Plan, the Agreement and the Notice of Grant, this Option shall not vest nor be exercisable until all necessary exchange control and other approvals from the SAFE or its local counterpart have been received by the Company or its Chinese Subsidiary under applicable exchange control rules with respect to the Plan and the awards thereunder.

Cashless Exercise Restriction . The following provisions supplement Section 4 of the International Stock Option Agreement:

Notwithstanding anything to the contrary in the Agreement, due to legal restrictions in China, you will be required to pay the Exercise Price by a cashless sell-call exercise through a licensed securities broker acceptable to the Company, such that all Shares subject to this Option will be sold immediately upon exercise ( i.e. , a “same day sale”) and the proceeds of sale, less the Exercise Price, any Tax-Related Items and broker’s fees or commissions, will be remitted to you in accordance with any applicable exchange control laws and regulations including but not limited to the restrictions set forth in this Appendix for China below under “Exchange Control Requirements.” The Company reserves the right to provide you with additional methods of exercise depending on the development of local law.

Exchange Control Requirements . By accepting this Option, you understand and agree that, pursuant to local exchange control requirements, you will be required to repatriate the cash proceeds from the immediate sale of the Shares issued upon the exercise of this Option to China. You further understand that, under local law, such repatriation of cash proceeds may need to be effectuated through a special exchange control account established by the Company and/or its Parent, Subsidiary or Affiliate, and you hereby consent and agree that any proceeds from the sale of any Shares you acquire may be transferred to such special account prior to being delivered to you. You further agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.

The proceeds may be paid to you in U.S. dollars or in local currency, at the Company’s discretion. If the proceeds are paid in U.S. dollars, you understand and agree that you will be required to set up a U.S. dollar bank account in China (if you do not already have one) so that the proceeds may be deposited into this account. If the proceeds are paid in local currency, you further understand and agree that the Company or its Parent, Subsidiary or Affiliate is under no obligation to secure any particular exchange

 

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conversion rate and there may be delays in converting the cash proceeds to local currency due to exchange control restrictions. You agree to bear any currency fluctuation risk between the time the cash proceeds are received and the time the cash proceeds are distributed to you through the special account described above.

You further agree to comply with any other requirements that may be imposed by the Company in the future to facilitate compliance with China exchange control requirements.

Notifications

Exchange Control Information . Chinese residents may be required to report to SAFE all details of their foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-Chinese residents.

FRANCE

Terms and Conditions

Language Consent . By accepting this Option, you confirm having read and understood the documents relating to this Option ( e.g. , the Plan and the Agreement and the Notice of Grant) which were provided in the English language. You accordingly accept the terms of those documents.

Consentement a la Langue . En signant et renvoyant cet Accord, ou par acceptant autrement l’Accord, le Titulaire de l’Option confirme ainsi avoir lu et compris les documents relatifs à l’Option, (c’est-à-dire, Le Plan et cet Accord) qui ont été fournis en langue anglaise. Le Titulaire de l’Option accepte les termes de ces documents en connaissance de cause.

Notifications

Foreign Asset/Account Reporting Information . French residents are required to report all foreign accounts (whether open, current or closed) to the French tax authorities when filing their annual tax returns. You should consult your personal advisor to ensure compliance with applicable reporting obligations.

GERMANY

Notifications

Exchange Control Information . Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). In case of payments in connection with the sale of Shares acquired under the Plan or the receipt of any cash dividends, the report must be filed electronically by the fifth day of the month following the month in which the payment was received. The form of report ( Allgemeine Meldeportal Statistik ) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English.

HONG KONG

Terms and Conditions

Sale of Shares . You agree that, in the event that any portion of this Option becomes vested and is exercisable prior to the six-month anniversary of the Date of Grant, you will not sell any Shares acquired upon exercise of this Option prior to the six-month anniversary of the Date of Grant. This Option and Shares purchased under the Plan are accepted as a personal investment.

Nature of Grant . The Company specifically intends that the Plan will not be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance (“ ORSO ”). Notwithstanding

 

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the foregoing, if the Plan is deemed to constitute an occupational retirement scheme for the purposes of ORSO, this Option shall be void.

Notifications

Securities Law Information . WARNING: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You should exercise caution in relation to the offer. Neither the grant of this Option nor the issuance of Shares upon exercise of this Option constitutes a public offering of securities under Hong Kong law and is available only to Employees, Non-Employee Directors and Consultants. The Agreement, including this Appendix, the Plan and other incidental communication materials distributed in connection with this Option (i) have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each eligible Employee, Non-Employee Director or Consultant and may not be distributed to any other person. If you have questions regarding the contents of the Agreement, including this Appendix or the Plan, you should obtain independent professional advice.

INDIA

Terms and Conditions

Exercise of Option . The following provisions supplement Section 4 of the International Stock Option Agreement:

Notwithstanding any provision of the Plan, the Agreement and the Notice of Grant, due to legal restrictions in India, you will not be permitted to pay the Exercise Price through any form of payment whereby some, but not all, of the Shares purchased upon exercise of this Option are sold to pay the Exercise Price. However, you will be permitted to pay the Exercise Price through any other form of payment set forth in the Agreement. Further, the Company reserves the right to allow additional forms of payment to you depending on the development of local law.

Notifications

Exchange Control Information . Indian residents are required to repatriate to India any proceeds from the sale of Shares acquired under the Plan within 90 days of receipt and any dividends within 180 days of payment. Indian residents subject to these repatriation obligations should obtain a foreign inward remittance certificate (“ FIRC ”) or other similar form from the bank where they deposit the funds and should maintains the FIRC or other form as evidence of the repatriation of funds in the event the Reserve Bank of India or their employer request proof of repatriation.

Foreign Asset/Account Reporting Information . Indian residents are required to declare any foreign bank accounts and any foreign financial assets (including Shares held outside India) on their annual tax returns. You are solely responsible for complying with this reporting obligation and should speak to your personal tax advisor to the extent you have questions in this regard.

IRELAND

Notifications

Director Notification Obligation . Directors, shadow directors and secretaries of the Company’s Irish Parents, Subsidiaries or Affiliates are subject to certain notification requirements under the Irish Companies Act. Directors, shadow directors and secretaries must notify the Irish Parents, Subsidiaries or Affiliates in writing of their interest in the Company ( e.g ., this Option, Shares, etc.) and the number and class of Shares or rights to which the interest relates within five business days of the acquisition or disposal of Shares or within five business days of becoming aware of the event giving rise to the

 

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notification. This disclosure requirement also applies to any rights or Shares acquired by the director’s spouse or children (under the age of 18).

Starting June 1, 2015, new legislation is expected to take effect, and once in effect, the obligation described above will not apply if the director’s interest in the Company represents one percent or less of the Company’s share capital or does not carry the right to vote.

ITALY

Terms and Conditions

Exercise of Option . The following provisions supplement Sections 3 and 4 of the International Stock Option Agreement:

Unless otherwise determined by the Committee, to exercise this Option, you must pay the Exercise Price by a cashless exercise method. Under the cashless exercise method, you must use a licensed securities broker acceptable to the Company, such that all Exercised Shares will be sold immediately upon exercise ( i.e. , a “same day sale”) and the proceeds of sale, less the Exercise Price, any Tax-Related Items and broker’s fees and commissions, will be remitted to you. The Company reserves the right to make additional forms of exercise available to you should they be available under Italian securities law.

Data Privacy . The following provisions replace Section 10 of the International Stock Option Agreement in its entirety:

You understand that the Employer, the Company, its Parent and any Subsidiaries or Affiliates may hold certain personal information about you, including your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares or directorships that you hold in the Company, details of all options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (“ Data ”), for the exclusive purpose of implementing, administering and managing your participation in the Plan.

You also understand that providing the Company with Data is necessary for the performance of the Plan and that your refusal to provide Data would make it impossible for the Company to perform its contractual obligations and may affect your ability to participate in the Plan. The Controller of personal data processing is Adesto Technologies Corporation, with its principal operating offices at 1250 Borregas Avenue, Sunnyvale, CA USA, and its representative in                                         .

You understand that Data will not be publicized, but it may be transferred to banks, other financial institutions or brokers involved in the management and administration of the Plan. You further understand that the Company, its Parent and any Subsidiaries or Affiliates will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan, and that the Company and/or its Parent, Subsidiaries or Affiliates may each further transfer Data to third parties assisting the Company in the implementation, administration and management of the Plan, including any requisite transfer to a broker or another third party with whom you may elect to deposit any Shares acquired under the Plan. Such recipients may receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan. You understand that these recipients may be located in the European Economic Area, or elsewhere, such as the United States. Should the Company exercise its discretion in suspending all necessary legal obligations connected with the management and administration of the Plan, you understand that the Company will delete Data as soon as it has accomplished all the necessary legal obligations connected with the management and administration of the Plan.

 

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You understand that Data processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Data are collected and with confidentiality and security provisions as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.

The processing activity, including communication, the transfer of Data abroad, including outside of the European Economic Area, as herein specified and pursuant to applicable laws and regulations, does not require your consent thereto as the processing is necessary to performance of contractual obligations related to implementation, administration and management of the Plan. You understand that, pursuant to Section 7 of the Legislative Decree no. 196/2003, you have the right to, including but not limited to, access, delete, update, ask for rectification of Data and cease, for legitimate reason, any processing of Data. Furthermore, you are aware that Data will not be used for direct marketing purposes. In addition, Data provided may be reviewed and questions or complaints can be addressed by contacting your local human resources department.

Plan Document Acknowledgment . By accepting this Option, you acknowledge that you have received a copy of the Plan, the Agreement, the Notice of Grant and this Appendix and reviewed the Plan, the Agreement, the Notice of Grant and this Appendix in their entirety and fully accept all provisions thereof. You further acknowledge that you have read and specifically and expressly approve the following provisions of the Agreement: (i) Termination, (ii) Withholding Taxes and Stock Withholding, (iii) Language, (iv) Governing Law; Severability, (v) Award Subject to Company Clawback or Recoupment, (vi) Data Privacy and (vii) the Terms and Conditions in this Appendix.

Notifications

Foreign Asset/Account Reporting Information . Italian residents who, at any time during the fiscal year, hold foreign financial assets (such as cash, Shares or this Option) which may generate income taxable in Italy are required to report such assets on their annual tax returns or on a special form if no tax return is due. The same reporting duties apply to Italian residents who are beneficial owners of the foreign financial assets pursuant to Italian money laundering provisions, even if they do not directly hold the foreign asset abroad. You should consult your personal legal advisor to ensure compliance with applicable reporting requirements.

JAPAN

Notifications

Exchange Control Information . If you acquire Shares valued at more than ¥100 million in a single transaction, you must file a Securities Acquisition Report with the Ministry of Finance (the “ MOF ”) through the Bank of Japan within 20 days of the acquisition.

In addition, if you pay more than ¥30 million in a single transaction for the purchase of Shares when you exercise this Option, you must file a Payment Report with the MOF through the Bank of Japan within 20 days of the date that the payment is made. The precise reporting requirements vary depending on whether or not the relevant payment is made through a bank in Japan. Please note that a Payment Report is required independently from a Securities Acquisition Report. Therefore, you must file both a Payment Report and a Securities Acquisition Report if the total amount that you pay in a single transaction for exercising this Option and purchasing Shares exceeds ¥100 million.

Foreign Asset/Account Reporting Information . You will be required to report details of any assets held outside of Japan as of December 31 (including the Shares acquired under the Plan), to the extent such assets have a total net fair market value exceeding ¥50 million. Such report will be due by March 15 each year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to report details of your outstanding Option, as well as the Shares, in the report.

 

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KOREA

Notifications

Exchange Control Information . To remit funds out of Korea to exercise this Option by a cash-exercise method, you must obtain a confirmation of the remittance by a foreign exchange bank in Korea. This is an automatic procedure ( i.e., the bank does not need to approve the remittance and the process should not take more than a single day). You likely will need to present the bank processing the transaction supporting documentation evidencing the nature of the remittance.

If you realize US$500,000 or more from the sale of Shares or the receipt of any dividends in a single transaction, Korean exchange control laws require you to repatriate the proceeds to Korea within 18 months of the sale or receipt of such proceeds.

Foreign Asset/Account Reporting Information . Korean residents must declare all foreign financial accounts ( i.e. , non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency). You should consult with your personal tax advisor to determine your personal reporting obligations.

NORWAY

There are no country-specific provisions.

PHILIPPINES

Terms and Conditions

Securities Law Acknowledgment . You acknowledge that you are not permitted to sell Shares acquired under the Plan within the Philippines; any sale of Shares shall take place outside of the Philippines through a U.S. broker appointed by the Company (or such other broker to whom you may transfer the Shares), provided that such sale takes place through the facilities of the stock exchange on which the Common Stock is listed.

RUSSIA

Terms and Conditions

U.S. Transaction . You understand that the acceptance of this Option results in an agreement between you and the Company that is completed in the United States and that the Agreement is governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. Upon exercise of this Option, any Shares to be issued to you shall be held or delivered to you in the United States and in no event will such Shares be delivered to you in Russia. You acknowledge that you are not permitted to sell or otherwise transfer Shares directly to other individuals in Russia, nor are you permitted to bring any certificates representing the Shares into Russia (if such certificates are actually issued).

Exercise of Option . The following provisions supplement Section 4 of the International Stock Option Agreement:

Depending on the development of local regulatory requirements, the Company reserves the right to restrict you to the cashless sell-all method of exercise, whereby all Exercised Shares will be sold immediately upon exercise and the sales proceeds, less the Exercise Price, any Tax-Related Items and broker’s fees or commissions, will be remitted to you in accordance with any applicable laws and regulations. If the Company restricts you to the cashless-sell-all method of exercise, you will not be permitted to hold Shares after exercise.

 

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Data Privacy . You hereby acknowledge that you have read and understood the terms regarding collection, processing and transfer of Data contained in Section 10 of the Agreement and, by participating in the Plan, you agree to such terms. In this regard, upon request of the Company or the Employer, you agree to provide an executed data privacy consent form to the Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in Russia, either now or in the future. You understand that you will not be able to participate in the Plan if you fail to execute any such consent or agreement.

Notifications

Securities Law Information . The Agreement, the Notice of Grant, the Plan and all other materials that you may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia. Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia. Therefore, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia.

Exchange Control Information . You may be subject to certain exchange control obligations under which any cash proceeds you receive related to the Shares (such as proceeds from the sale of the Shares, but not including dividends on Shares) must be repatriated to Russia within a reasonably short period after receipt. Such cash amounts may be required to be initially credited to you through a foreign currency account opened in your name at an authorized bank in Russia. After the funds are initially received in Russia, they may be able to be further remitted to a foreign bank subject to the following limitations: (i) the foreign account may be opened only for individuals; (ii) the foreign account may not be used for business activities; and (iii) the Russian tax authorities must be given notice about the opening/closing of each foreign account within one month of the account opening/closing. You should contact your bank in Russia and consult with your personal legal advisor to confirm the application of the exchange control rules to this Option prior to exercising this Option. Significant penalties may apply in the case of non-compliance with the exchange control requirements and exchange control requirements are subject to change.

Labor Law Information . If you continue to hold Shares acquired at exercise of this Option after an involuntary termination of your Service, you may not be eligible to receive unemployment benefits in Russia.

Anti-Corruption Law Information . Certain individuals who hold public office in Russia, as well as their spouses and dependent children, are prohibited from opening or maintaining foreign brokerage or bank accounts and holding any securities, whether acquired directly or indirectly in a foreign company (including Shares acquired under the Plan). You should consult with your personal legal advisor to determine whether this law applies to you.

SINGAPORE

Notifications

Securities Law Information . This Option is being granted pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“ SFA ”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. You should note that this Option is subject to section 257 of the SFA and you will not be able to make (i) any subsequent sale of the Shares in Singapore or (ii) any offer of such subsequent sale of the Shares subject to the Option in Singapore, unless such sale or offer in is made pursuant to the exemptions under Part XIII Division 1 Subdivision (4) (other than section 280) of the SFA.

 

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Chief Executive Officer and Director Notification Obligation . If you are a chief executive officer, director, associate director or shadow director 1 of a Singapore Subsidiary or Affiliate, you must notify the Singapore Subsidiary or Affiliate in writing of an interest ( e.g. , this Option, Shares, etc.) in the Company or any Subsidiary or Affiliate within two business days of (i) acquiring or disposing of such interest, (ii) any change in a previously disclosed interest ( e.g. , sale of Shares), or (iii) becoming a chief executive officer, director, associate director or shadow director.

SPAIN

Terms and Conditions

Nature of Grant . The following provisions supplement Section 9 of the International Stock Option Agreement:

In accepting this Option, you consent to participation in the Plan and acknowledge that you have received a copy of the Plan.

Further, you understand that the Company has unilaterally, gratuitously and in its sole discretion decided to grant stock options under the Plan to individuals who provide Service to the Company or its Parents, Subsidiaries or Affiliates throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that any award will not economically or otherwise bind the Company or any of its Parents, Subsidiaries or Affiliates on an ongoing basis, other than as provided in the Plan and Agreement. Consequently, you understand that this Option is granted on the assumption and condition that this Option or the Shares acquired upon settlement shall not become a part of any employment or consulting agreement (either with the Company or any Parent, Subsidiary or Affiliate) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, you understand that this award would not be made to you but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then the award of this Options shall be null and void.

You also understand and agree that, as a condition of the grant and vesting of this Option, upon the termination of your Service for any reason (including the reasons listed below), this Option will cease vesting immediately, in whole or in part, effective on the date of termination of your Service. This will be the case, for example, even in the event of a termination of your Service by reason of, but not limited to, resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause, individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer and under Article 10.3 of the Royal Decree 1382/1985. You acknowledge that you have read and specifically accept the conditions referred to in the “Termination” and “Nature of Grant” sections of the Agreement.

Notifications

Securities Law Information . The grant of this Option and the Shares issued pursuant to the exercise of this Option are considered a private placement outside of the scope of Spanish laws on public offerings and issuances of securities.

Exchange Control Information . To participate in the Plan, you must comply with exchange control regulations in Spain. The purchase of Shares upon exercise of this Option and the sale of Shares must be declared for statistical purposes to the Dirección General de Comercio e Inversiones (the “ DGCI ”) of the

 

1  

A shadow director is an individual who is not on the board of directors of the Singapore Subsidiary or Affiliate but who has sufficient control so that the board of directors of the Singapore Subsidiary or Affiliate acts in accordance with the directions or instructions of the individual.

 

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Ministry of Industry, Tourism and Commerce. Because you will not purchase or sell the Shares through the use of a Spanish financial institution, you must make the declaration yourself by filing a D-6 form with the DGCI. Generally, the D-6 form must be filed each January while the Shares are owned or to report the sale of the Shares; however, if the value of the Shares acquired or the amount of the sale proceeds you realize from the sale of Shares exceeds €1,502,530, the declaration must be filed within one month of the acquisition or sale, as applicable.

Foreign Asset/Account Reporting Information . Spanish residents holding rights or assets ( e.g. , Shares or cash held in a bank or brokerage account) outside of Spain with a value in excess of €50,000 per type of right or asset ( e.g. , Shares, cash, etc.) as of December 31 each year are required to report information on such rights and assets on their tax returns for such year. After such rights and assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously-reported rights or assets increases by more than €20,000. The reporting must be completed by March 31 following the end of the relevant year. It is your responsibility to comply with these reporting obligations, and you should consult with your personal tax and legal advisors in this regard.

In addition, Spanish residents are required to electronically declare to the Bank of Spain any securities accounts (including brokerage accounts held abroad), as well as the securities (including Shares acquired under the Plan) held in such accounts if the value of the transactions for all such accounts during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceeds €1,000,000.

SWEDEN

There are no country-specific provisions.

TAIWAN

Notifications

Securities Law Information . The offer of participation in the Plan is available only to those who provide Service. The offer of participation in the Plan is not a public offer of securities by a Taiwanese company.

Exchange Control Information . The acquisition or conversion of foreign currency and the remittance of such amounts (including proceeds from the sale of Shares) to Taiwan may trigger certain annual or periodic exchange control reporting. If the transaction amount is TWD500,000 or more in a single transaction, Taiwanese residents may be required to submit a Foreign Exchange Transaction Form and provide supporting documentation to the satisfaction of the remitting bank.

UNITED KINGDOM

Terms and Conditions

Responsibility for Taxes . The following provisions supplement Section 8 of the International Stock Option Agreement:

You agree that if payment or withholding of income tax due is not made within 90 days of the end of the U.K. tax year in which the taxable event occurs or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “ Due Date ”), then the amount of any uncollected income tax shall constitute a loan owed by you to the Employer, effective on the Due Date. You agree that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue & Customs (“ HMRC ”) and will be immediately due and repayable by you, and the Company and/or the Employer may recover it at any time thereafter by any of the means referred to in Section 8 of the Agreement. Notwithstanding the foregoing, if you are an executive officer or director of the Company (within the meaning of Section 13(k) of the Exchange Act), you shall not be eligible for a loan from the Company to cover the income tax due. In the event that you are an executive officer or director and

 

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income tax is not collected from or paid by you by the Due Date, the amount of any uncollected income tax may constitute a benefit to you on which additional income tax and National Insurance contributions (“ NICs ”) may be payable. You understand that you will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company and/or the Employer (as appropriate) for the value of employee NICs due on this additional benefit which the Company and/or the Employer may recover from you by any of the means set forth in Section 8 of the Agreement.

Joint Election . As a condition of your participation in the Plan, you agree to accept any liability for secondary Class 1 NICs which may be payable by the Company and/or the Employer in connection with this Option and any event giving rise to Tax-Related Items (the “ Employer’s NICs ”). Without limitation to the foregoing, you agree to enter into a joint election with the Company and/or the Employer (the “ Joint Election ”), the form of such Joint Election being formally approved by HMRC, and to execute any other consents or elections required to accomplish the transfer of the Employer’s NICs to you. You further agree to execute such other joint elections as may be required between you and any successor to the Company and/or the Employer. You further agree that the Company and/or the Employer may collect the Employer’s NICs from you by any of the means set forth in Section 8 of the Agreement.

If you do not enter into a Joint Election, if approval of the Joint Election has been withdrawn by HMRC, if the Joint Election is revoked by the Company or the Employer (as applicable), or if the Joint Election is jointly revoked by you and the Company or the Employer (as applicable), the Company, in its sole discretion and without any liability to the Company or the Employer, may choose not to issue or deliver any Shares or proceeds from the sale of Shares to you upon exercise of this Option.

 

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NOTICE OF RESTRICTED STOCK AWARD

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this Notice of Restricted Stock Award (this “ Notice ”) and the attached Restricted Stock Agreement (the “ Agreement ”). You have been granted the opportunity to purchase Shares of Adesto Technologies Corporation (the “ Company ”) that are subject to restrictions (the “ Restricted Shares ”) and the terms and conditions of the Plan, this Notice and the Agreement.

 

Name of Purchaser:

 

 

 

Address:

 

 

 

Total Number of Restricted Shares Awarded :  

 

Fair Market Value per Restricted Share :   $  

 

Total Fair Market Value of Award :   $  

 

Purchase Price per Restricted Share :   $  

 

Total Purchase Price for all Restricted Shares :   $  

 

Date of Grant :  

 

Vesting Commencement Date :  

 

Vesting Schedule :   Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE]
Additional Terms :   ¨   If this box is checked, the additional terms and conditions set forth on Attachment 1 hereto (as executed by the Company) are applicable and are incorporated herein by reference. No document need be attached as Attachment 1 if the box is not checked.

You acknowledge that the vesting of the Restricted Shares pursuant to this Notice is earned only by continuing Service. By accepting the Restricted Shares, you and the Company agree that the Restricted Shares are granted under and governed by the terms and conditions of the Plan, this Notice and the Agreement. By accepting the Restricted Shares, you consent to electronic delivery as set forth in the Agreement. If the Agreement is not executed by you within thirty (30) days of the Date of Grant above, then this grant shall be void.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 


RESTRICTED STOCK AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

THIS RESTRICTED STOCK AGREEMENT (this “ Agreement ”) is made as of             , 2015 by and between Adesto Technologies Corporation, a Delaware corporation (the “ Company ”), and                      (“ you ”) pursuant to the Company’s 2015 Equity Incentive Plan (the “ Plan ”). Unless otherwise defined herein, the terms defined in the Plan shall have the same meanings in this Agreement.

1. Sale of Stock . Subject to the terms and conditions of this Agreement, on the Purchase Date (as defined below) the Company will issue and sell to you, and you agree to purchase from the Company, the number of Shares shown on the Notice of Restricted Stock Award (the “ Notice ”) at the Purchase Price per Share set forth on the Notice. The term “ Shares ” refers to the purchased Shares and all securities received in replacement of or in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which you are entitled by reason of your ownership of the Shares.

2. Time and Place of Purchase . The purchase and sale of the Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution of this Agreement by the parties, or on such other date as the Company and you shall agree (the “ Purchase Date ”). On the Purchase Date, the Company will issue a stock certificate registered in your name, or uncertificated shares designated for you in book entry form on the records of the Company’s transfer agent, representing the Shares to be purchased by you against payment of the purchase price therefor by you by (a) check made payable to the Company, (b) cancellation of indebtedness of the Company to you, (c) your personal Services that the Committee has determined have already been or will be rendered to the Company, or (d) a combination of the foregoing.

3. Restrictions on Resale . By signing this Agreement, you agree not to sell any Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as you are providing Service.

4. Company’s Repurchase Right for Unvested Shares . The Company, or (subject to Section 4.4) its assignee, shall have the right (but not the obligation) to repurchase a portion of the Shares that are Unvested Shares (as defined below) at the times and on the terms and conditions set forth in this Section (the “ Repurchase Right ”) if your Service terminates for any reason, or no reason, including without limitation, death, Disability, voluntary resignation or termination by the Company with or without Cause.

4.1 Termination of Service . In case of any dispute as to whether your Service has terminated, the Committee shall have discretion to determine in good faith whether your Service has been terminated and the effective date of your termination of Service.

4.2 Vested and Unvested Shares . Shares that are vested pursuant to the Vesting Schedule set forth in the Notice are “ Vested Shares . Shares that are not vested pursuant to the Vesting Schedule set forth in the Notice are Unvested Shares . On the Date of Grant, all of the Shares will be Unvested Shares. No fractional Shares shall be issued. No Shares will become Vested Shares after your termination of Service unless as set forth in the Vesting Schedule in the Notice. The number of the

 

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Shares that are Vested Shares or Unvested Shares will be proportionally adjusted to reflect any stock split, reverse stock split or similar change in the capital structure of the Company as set forth in Section 2.6 of the Plan occurring after the Date of Grant.

4.3 Exercise of Repurchase Right . Unless the Company provides written notice to you within 90 days from the date of termination of your Service that the Company does not intend to exercise its Repurchase Right with respect to some or all of the Unvested Shares, the Repurchase Right shall be deemed automatically exercised by the Company as of the 90th day following such termination, provided that the Company may notify you that it is exercising its Repurchase Right as of a date prior to such 90th day. Unless you are otherwise notified by the Company pursuant to the preceding sentence that the Company does not intend to exercise its Repurchase Right as to some or all of the Unvested Shares, execution of this Agreement by you constitutes written notice to you of the Company’s intention to exercise its Repurchase Right with respect to all Unvested Shares to which such Repurchase Right applies at the time of your termination of Service. The Company, at its choice, may satisfy its payment obligation to you with respect to exercise of the Repurchase Right by either (A) delivering a check to you or wiring funds in the amount of the purchase price for the Unvested Shares being repurchased, or (B) in the event you are indebted to the Company, canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, or (C) by a combination of (A) and (B) so that the combined payment and cancellation of indebtedness equals such purchase price. In the event of any deemed automatic exercise of the Repurchase Right by canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, such cancellation of indebtedness shall be deemed automatically to occur as of the date of termination of your Service unless the Company otherwise satisfies its payment obligations. As a result of any repurchase of Unvested Shares pursuant to the Repurchase Right, the Company shall become the legal and beneficial owner of the Unvested Shares being repurchased and shall have all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the number of Unvested Shares being repurchased by the Company, without further action by you.

4.4 Assignment . The Repurchase Right may be assigned by the Company in whole or in part to any persons or organization.

4.5 Additional or Exchanged Securities and Property . Subject to the provisions of Section 4.2 above, in the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed or issued with respect to, any Unvested Shares shall immediately be subject to the Repurchase Right. Appropriate adjustments shall be made to the price per share to be paid for Unvested Shares upon the exercise of the Repurchase Right (by allocating such price among the Unvested Shares and such other securities or property), provided that the aggregate purchase price payable for the Unvested Shares and all such other securities and property shall remain the same price that was original payable under the Repurchase Right to repurchase such Unvested Shares. Subject to the provisions of Section 4.2 above, in the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Repurchase Option may be exercised by the Company’s successor.

5. Non-Transferability of Unvested Shares . In addition to any other limitation on transfer created by applicable securities laws or any other agreement between the Company and you, you may not transfer any Unvested Shares, or any interest therein, unless consented to in writing by a duly authorized representative of the Company. Any purported transfer is void and of no effect, and no purported transferee thereof will be recognized as a holder of the Unvested Shares for any purpose whatsoever.

 

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Should such a transfer purport to occur, the Company may refuse to carry out the transfer on its books, set aside the transfer, or exercise any other legal or equitable remedy. In the event the Company consents to a transfer of Unvested Shares, all transferees of Shares or any interest therein will receive and hold such Shares or interest subject to the provisions of this Agreement, including, insofar as applicable, the Repurchase Right. In the event of any purchase by the Company hereunder where the Shares or interest are held by a transferee, the transferee shall be obligated, if requested by the Company, to transfer the Shares or interest you for consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase Right is deemed exercised by the Company, the Company may deem any transferee to have transferred the Shares or interest to you prior to their purchase by the Company, and payment of the purchase price by the Company to such transferee shall be deemed to satisfy your obligation to pay such transferee for such Shares or interest, and also to satisfy the Company’s obligation to pay you for such Shares or interest.

6. Stop Transfer Orders .

6.1 Stop-Transfer Notices . You agree that, in order 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.

6.2 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 the owner 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.

7. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time ( i.e. , is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

8. Miscellaneous .

8.1 Acknowledgement . The Company and you agree that the Restricted Shares are granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the Restricted Shares subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and the Restricted Stock Agreement.

8.2 Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

 

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8.3 Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock (“ Common Stock ”) may be listed or quoted at the time of such issuance or transfer, which compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

8.4 Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.

8.5 Construction . This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

8.6 Notices . Any notice to be given under the terms of the Plan shall be addressed to the Company in care of its principal office, and any notice to be given to you shall be addressed to you at the address maintained by the Company for such person or at such other address as you may specify in writing to the Company.

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

8.8 U.S. Tax Consequences . Unless an Election (defined below) is made, upon vesting of Shares, you will include in taxable income the difference between the fair market value of the vesting Shares, as determined on the date of their vesting, and the price paid for the Shares. This will be treated as ordinary income by you and will be subject to withholding by the Company when required by applicable law. In the absence of an Election, the Company shall satisfy the withholding requirements as set forth in Section 9 below. If you make an Election, then you must, prior to making the Election, pay in cash or check to the Company an amount equal to the amount the Company is required to withhold for income and employment taxes.

9. 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,

 

4


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 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 or any aspect of the Restricted Shares to reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

The Company will only recognize you as a record holder of Shares if 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 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 released from the Repurchase Right when they vest, 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 and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. The Fair Market Value of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. 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. Finally, you acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

10. Section 83(b) Election . You hereby acknowledge that you have been informed that, with respect to the purchase of the Shares, an election may be filed by you with the Internal Revenue Service, within 30 days of the purchase of the Shares, electing for United States tax purposes pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “ Code ”) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase (the “ Election ”). Making the Election will result in recognition of taxable income to you on the date of purchase, measured by the excess, if any, of the Fair Market Value of the Shares over the purchase price for the Shares. Absent such an Election, taxable income will be measured and recognized by you at the time or times on which the Company’s Repurchase Right lapses. You are strongly encouraged to seek the advice of your own tax advisors in connection with the purchase of the Shares and the advisability of filing of the Election. YOU ACKNOWLEDGE THAT IT IS SOLELY YOUR RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF YOU REQUEST THE COMPANY, OR ITS REPRESENTATIVE, TO MAKE THIS FILING ON YOUR BEHALF.

 

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11. Consent to Electronic Delivery of All Plan Documents and Disclosures . By acceptance of this Restricted Stock Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Restricted Stock Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

12. Award Subject to Company Clawback or Recoupment . To the extent permitted by applicable law, the Shares shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Shares (whether vested or unvested) and the recoupment of any gains realized with respect to your Shares.

BY ACCEPTING THIS RESTRICTED STOCK AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

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RECEIPT

Adesto Technologies Corporation hereby acknowledges receipt of (check as applicable):

¨ A check or wire transfer in the amount of $            

¨ The cancellation of indebtedness in the amount of $            

¨ Given by                      as consideration for the book entry in your name or Certificate No. -     for              shares of common stock of Adesto Technologies Corporation

¨ Other method as permitted by the Plan and specifically approved by the Board or Committee, and described here:

 

 

Dated:  

 

 

ADESTO TECHNOLOGIES CORPORATION:
By:  

 

Print Name:  

 

Its:  

 

 


RECEIPT AND CONSENT

The undersigned hereby acknowledges the book entry in his or her name or receipt of a photocopy of Certificate No. -     for              shares of common stock of Adesto Technologies Corporation (the “ Company ”).

The undersigned further acknowledges that the Secretary of the Company, or his or her designee, is acting as escrow holder pursuant to the Restricted Stock Agreement that he or she has previously entered into with the Company. As escrow holder, the Secretary of the Company, or his or her designee, holds the original of the aforementioned certificate issued in the undersigned’s name. To facilitate any transfer of Shares to the Company pursuant to the Restricted Stock Agreement, the undersigned has executed the attached Assignment Separate from Certificate.

 

Dated:             , 20    
Signature:  

 

Print Name:  

 

 


STOCK POWER AND ASSIGNMENT

SEPARATE FROM STOCK CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Agreement dated as of             ,         , [ COMPLETE AT THE TIME OF PURCHASE ] (the “ Agreement ”), the undersigned hereby sells, assigns and transfers unto                                         ,              shares of the common stock of Adesto Technologies Corporation, a Delaware corporation (the “ Company ”), standing in the undersigned’s name on the books of the Company represented hereby by book entry or by Certificate No(s).      [ COMPLETE AT THE TIME OF PURCHASE ] delivered herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company as the undersigned’s attorney-in-fact, with full power of substitution, to transfer said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.

Dated:             ,         

 

PARTICIPANT:
Signature:  

 

Print Name:  

 

Instructions : Please do not fill in any blanks other than the signature line. The purpose of this document is to enable the Company and/or its assignee(s) to acquire the shares upon exercise of its “Repurchase Right” set forth in the Agreement without requiring additional action.

 


NOTICE OF STOCK BONUS AWARD

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this Notice of Stock Bonus Award (this “ Notice ”) and the attached Stock Bonus Award Agreement (the “ Agreement ”). You have been granted an award of Shares (the “ Stock Bonus Award ”) under the Plan subject to the terms and conditions of the Plan, this Notice and the Agreement.

 

Name:   

 

 

Address:   

 

 

Number of Shares:   

 

 

Date of Grant:   

 

 

Vesting Commencement Date:    [March [15], June [15], September [15] or December [15]]
Vesting Schedule:    Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE]

You acknowledge that the vesting of the Shares pursuant to this Notice is earned only by continuing Service. By accepting the Stock Bonus Award, you and the Company agree that the Stock Bonus Award is granted under and governed by the terms and conditions of the Plan, this Notice and the Agreement. By accepting the Stock Bonus Award, you consent to electronic delivery as set forth in the Agreement.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 


STOCK BONUS AWARD AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted an award of Shares (the “ Stock Bonus Award ”) by Adesto Technologies Corporation (the “ Company ”) under the 2015 Equity Incentive Plan (the “ Plan ”), subject to the terms, restrictions and conditions of the Plan, the Notice of Stock Bonus Award (the “ Notice ”) and this Stock Bonus Award Agreement (this “ Agreement ”).

1. Issuance . Your Stock Bonus Award shall be issued in Shares and the Company’s transfer agent shall record ownership of such Shares in your name as soon as reasonably practicable.

2. No Stockholder Rights . Unless and until you are recorded as the holder of such Shares on the stock records of the Company and its transfer agent, you shall have no right to dividends or to vote Shares.

3. No-Transfer . Unvested Shares subject to your Stock Bonus Award shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of by you or any person whose interest derives from your interest. “ Unvested Shares ” are Shares that have not yet vested pursuant to the terms of the Vesting Schedule set forth in the Notice.

4. Termination . If your Service terminates for any reason, all Unvested Shares shall immediately be forfeited to the Company, and all rights you have to such Unvested Shares shall immediately terminate. In case of any dispute as to whether a termination of Service has occurred, the Committee shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

5. Tax Consequences . YOU SHOULD CONSULT A TAX ADVISER IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX BEFORE ACQUIRING THE SHARES. Shares shall not be issued under this Agreement unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the acquisition or vesting of Shares.

6. 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 Stock Bonus Award, including the Stock Bonus Award or vesting of Shares acquired pursuant to the Stock Bonus Award, the subsequent sale of Shares acquired pursuant to this Stock Bonus 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. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

The Company will only recognize you as a record holder of Shares if 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 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 released when they vest, 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

 

1


your behalf and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. The Fair Market Value of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. 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. Finally, you acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

7. Acknowledgement . The Company and you agree that the Stock Bonus Award is granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the Stock Bonus Award subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement.

8. Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

9. Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock (“ Common Stock ”) may be listed or quoted at the time of such issuance or transfer, which compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

10. Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice or this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be

 

2


conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.

10. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

11. Consent to Electronic Delivery of All Plan Documents and Disclosures . By your acceptance of this Stock Bonus Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Stock Bonus Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

12. Award Subject to Company Clawback or Recoupment . To the extent permitted by applicable law, the Stock Bonus Award shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Stock Bonus Award (whether vested or unvested) and the recoupment of any gains realized with respect to your Stock Bonus Award.

BY ACCEPTING THE STOCK BONUS AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

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NOTICE OF STOCK APPRECIATION RIGHT AWARD

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this Notice of Stock Appreciation Right Award (this “ Notice of Grant ”) and the attached Stock Appreciation Right Agreement (the “ Agreement ”). You have been granted an award of a Stock Appreciation Right (the “ SAR ”) of the Company under the Plan subject to the terms and conditions of the Plan, this Notice of Grant and the Agreement.

 

Name:   

 

Address:   

 

Date of Grant:   

 

Vesting Commencement Date:   

 

Fair Market Value on Date of Grant:   

 

Total Number of Shares:   

 

Expiration Date:   

 

Vesting Schedule:    Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE]

You acknowledge that the vesting of the SAR pursuant to this Notice of Grant is earned only by continuing Service. By accepting the SAR, you and the Company agree that the SAR is granted under and governed by the terms and conditions of the Plan, this Notice of Grant and the Agreement. By accepting the SAR, you consent to electronic delivery as set forth in the Agreement.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 


STOCK APPRECIATION RIGHT AWARD AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted an award of Stock Appreciation Rights (the “ SAR ”) by Adesto Technologies Corporation (the “ Company ”) under the 2015 Equity Incentive Plan (the “ Plan ”), subject to the terms and conditions of the Plan, the Notice of Stock Appreciation Right Award (the “ Notice of Grant ”) and this Stock Appreciation Right Agreement (this “ Agreement ”).

1. Grant of SAR . You have been granted a SAR for the number of Shares set forth in the Notice of Grant at the fair market value set forth in the Notice of Grant. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail.

2. Termination Period .

(a) General Rule . If your Service terminates for any reason except death or Disability, and other than for Cause, then this SAR will expire at the close of business at Company headquarters on the date three months after your termination of Service (subject to the expiration detailed in Section 6). In no event shall this SAR be exercised later than the Expiration Date set forth in the Notice of Grant. If your Service is terminated for Cause, this SAR will expire upon the date of such termination. The Company determines when your Service terminates for all purposes under this Agreement.

(b) Death; Disability . If you die before your Service terminates (or you die within three months of your termination of Service other than for Cause), then this SAR will expire at the close of business at Company headquarters on the date 12 months after the date of death (subject to the expiration detailed in Section 6). If your Service terminates because of your Disability, then this SAR will expire at the close of business at Company headquarters on the date 12 months after your termination date (subject to the expiration detailed in Section 6).

(c) No Notice . You are responsible for keeping track of these exercise periods following your termination of Service for any reason. The Company will not provide further notice of such periods. In no event shall this SAR be exercised later than the Expiration Date set forth in the Notice of Grant.

3. Vesting Rights . Subject to the applicable provisions of the Plan and this Agreement, this SAR may be exercised, in whole or in part, in accordance with the Vesting Schedule set forth in the Notice of Grant.

4. Exercise of SAR .

(a) Right to Exercise . This SAR is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and this Agreement. In the event of your death, Disability, or other cessation of Service, the exercisability of the SAR is governed by the applicable provisions of the Plan, the Notice of Grant and this Agreement. No fractional SARs or rights for fractional Shares shall be created pursuant to this Agreement.

(b) Method of Exercise . This SAR is exercisable by delivery of an exercise notice in a form specified by the Company (the “ Exercise Notice ”), which shall state the election to exercise the SAR, the number of Shares in respect of which the SAR is being exercised, and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. This SAR shall be deemed to be exercised upon


receipt by the Company of a fully executed Exercise Notice and any applicable tax withholding due upon exercise of the SAR.

(c) No Shares shall be issued pursuant to the exercise of this SAR unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for income tax purposes the exercised Shares shall be considered transferred to you on the date the SAR is exercised with respect to such exercised Shares.

5. Non-Transferability of SAR . This SAR may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during your lifetime only by you unless otherwise permitted by the Committee on a case-by-case basis. The terms of the Plan and this Agreement shall be binding upon your executors, administrators, heirs, successors and assign.

6. Term of SAR . This SAR shall in any event expire on the expiration date set forth in the Notice of Grant, which date is 10 years after the Date of Grant.

7. Tax Consequences . YOU SHOULD CONSULT A TAX ADVISER IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX BEFORE EXERCISING THIS SAR OR DISPOSING OF THE SHARES ACQUIRED PURSUANT TO SUCH EXERCISE. If you are an Employee or a former Employee, the Company may be required to withhold from your compensation an amount equal to the minimum amount the Company is required to withhold for income and employment taxes or collect from you and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise of the SAR.

8. 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 SAR, including the grant, vesting or exercise of the SAR, 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 SAR to reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

Prior to exercise of the SAR, 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 SAR, 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 and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. The Fair Market Value of these Shares, determined as


of the effective date of the exercise of the SAR, will be applied as a credit against the withholding taxes. 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. Finally, you acknowledge that the Company has no obligation to honor the exercise of the SAR or deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

9. Acknowledgement . The Company and you agree that the SAR is granted under and governed by the Notice of Grant, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the SAR subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and this Agreement.

10. Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice of Grant constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

11. Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock (“ Common Stock ”) may be listed or quoted at the time of such issuance or transfer, which compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

12. Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice of Grant or this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.

13. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.


14. Consent to Electronic Delivery of All Plan Documents and Disclosures . By your acceptance of this SAR, you consent to the electronic delivery of the Notice of Grant, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the SAR. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

15. Award Subject to Company Clawback or Recoupment . To the extent permitted by applicable law, the SAR shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your SAR (whether vested or unvested) and the recoupment of any gains realized with respect to your SAR.

BY ACCEPTING THIS SAR, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.


NOTICE OF RESTRICTED STOCK UNIT AWARD

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

GRANT NUMBER:            

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this Notice of Restricted Stock Unit Award (this “ Notice ”) and the attached Restricted Stock Unit Agreement (the “ Agreement ”). You have been granted an award of Restricted Stock Units (the “ RSUs ”) under the Plan subject to the terms and conditions of the Plan, this Notice and the Agreement.

 

Name:   

 

Address:   

 

Number of RSUs:   

 

Date of Grant:   

 

Vesting Commencement Date:   

 

Expiration Date:    The earlier to occur of: (a) the settlement of all vested RSUs granted hereunder, and (b) the tenth anniversary of the Date of Grant. The RSUs expire earlier if your Service terminates earlier, as described in the Agreement.
Vesting Schedule:    Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE]
Additional Terms:    ¨   If this box is checked, the additional terms and conditions set forth on Attachment 1 hereto (as executed by the Company) are applicable and are incorporated herein by reference. No document need be attached as Attachment 1 if the box is not checked.

You acknowledge that the vesting of the RSUs pursuant to this Notice is earned only by continuing Service. By accepting the RSUs, you and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Plan, this Notice and the Agreement. By accepting the RSUs, you consent to electronic delivery as set forth in the Agreement.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 

RESTRICTED STOCK UNIT AGREEMENT

 

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ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted Restricted Stock Units (“ RSUs ”) by Adesto Technologies Corporation (the “ Company ”) under the 2015 Equity Incentive Plan (the “ Plan ”) subject to the terms, restrictions and conditions of the Plan, the Notice of Restricted Stock Unit Award (the “ Notice ”) and this Restricted Stock Unit Agreement (this “ Agreement ”).

1. Settlement . Settlement of RSUs shall be made in the same calendar year as the applicable date of vesting under the Vesting Schedule set forth in the Notice; provided, however, that if the vesting date under the Vesting Schedule set forth in the Notice is in December, then settlement of any RSUs that vest in December shall be within 30 days of vesting. Settlement of RSUs shall be in Shares. Settlement means the delivery to you of the Shares vested under an RSU. No fractional RSUs or rights for fractional Shares shall be created pursuant to this Agreement.

2. No Stockholder Rights . Unless and until such time as Shares are issued in settlement of vested RSUs, you shall have no ownership of the Shares allocated to the RSUs and shall have no right to dividends or to vote such Shares.

3. Dividend Equivalents . Dividends, if any (whether in cash or Shares), shall not be credited to you.

4. No Transfer . RSUs may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.

5. Termination . If your Service terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights you have to such RSUs shall immediately terminate, without payment of any consideration to you. Your Service will be considered terminated as of the date you are no longer providing Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any) and will not, subject to the laws applicable to your RSUs, be extended by any notice period mandated under local employment laws (e.g., Service would not include a period of “garden leave” or similar period). In case of any dispute as to whether your termination of Service has occurred, the Committee shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

6. Tax Consequences . You acknowledge that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and you should consult a tax adviser regarding your tax obligations prior to such settlement or disposition in the jurisdiction where you are subject to tax.

7. 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 RSUs, including the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends and (2) do not commit to structure the terms of the award or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

 

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Prior to the settlement of your RSUs, 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 your RSUs are settled, 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 and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. The Fair Market Value of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes.

Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case you will receive a refund of any over-withheld amount in cash and will have no entitlement to the Shares equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

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 the vesting and settlement of the RSUs that cannot be satisfied by the means previously described. Finally, you acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

8. Acknowledgement . The Company and you agree that the RSUs are granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the RSUs subject to all of the terms and conditions set forth in this Agreement and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement.

9. Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

10. Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock (“ Common Stock ”) may be listed or quoted at the time of such issuance or transfer, which

 

3


compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

11. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

12. Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.

13. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

14. Consent to Electronic Delivery of All Plan Documents and Disclosures . By your acceptance of the RSUs, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the RSUs. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

15. Imposition of Other Requirements . The Company reserves the right to impose other requirements on your participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the

 

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Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

16. Code Section 409A . For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”) and the regulations thereunder (“ Section 409A ”). Notwithstanding anything else provided herein, to the extent any payments provided under this Agreement in connection with your termination of employment constitute deferred compensation subject to Section 409A, and you are deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the six-month period measured from your separation from service from the Company or (ii) the date of your death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to you including, without limitation, the additional tax for which you would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

17. Award Subject to Company Clawback or Recoupment . The RSUs shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to your RSUs.

BY ACCEPTING THE RSUs, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

5


INTERNATIONAL NOTICE OF RESTRICTED STOCK UNIT AWARD

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

GRANT NUMBER:            

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this International Notice of Restricted Stock Unit Award (this “ Notice ”) and the attached International Restricted Stock Unit Agreement (including any special terms and conditions for your country set forth in the appendix attached thereto (the “ Appendix ”) (collectively, the “ Agreement ”)). You have been granted an award of Restricted Stock Units (the “ RSUs ”) under the Plan subject to the terms and conditions of the Plan, this Notice and the Agreement.

 

Name:   

 

Address:   

 

Number of RSUs:   

 

Date of Grant:   

 

Vesting Commencement Date:   

 

Expiration Date:    The earlier to occur of: (a) the settlement of all vested RSUs granted hereunder, and (b) the tenth anniversary of the Date of Grant. The RSUs expire earlier if your Service terminates earlier, as described in the Agreement.
Vesting Schedule:    Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE]
Additional Terms:    ¨   If this box is checked, the additional terms and conditions set forth on Attachment 1 hereto (as executed by the Company) are applicable and are incorporated herein by reference. No document need be attached as Attachment 1 if the box is not checked.

You acknowledge that the vesting of the RSUs pursuant to this Notice is earned only by continuing Service. By accepting the RSUs, you and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Plan, this Notice and the Agreement. By accepting the RSUs, you consent to electronic delivery as set forth in the Agreement.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 


INTERNATIONAL RESTRICTED STOCK UNIT AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted Restricted Stock Units (“ RSUs ”) by Adesto Technologies Corporation (the “ Company ”) under the 2015 Equity Incentive Plan (the “ Plan ”) subject to the terms, restrictions and conditions of the Plan, the International Notice of Restricted Stock Unit Award (the “ Notice ”) and this International Restricted Stock Unit Agreement (including any special terms and conditions for your country set forth in the appendix attached hereto (the “ Appendix ”) (collectively, this “ Agreement ”)).

1. Nature of Grant . In accepting this award of RSUs, you acknowledge, understand and agree that:

(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b) the grant of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future awards of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;

(c) all decisions with respect to future RSUs or other grants, if any, will be at the sole discretion of the Company;

(d) you are voluntarily participating in the Plan;

(e) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not intended to replace any pension rights or compensation;

(f) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

(g) unless otherwise agreed with the Company, the RSUs and any Shares acquired under the Plan, and the income and value of same, are not granted as consideration for, or in connection with, any service you may provide as a director of the Company, or a Parent or Subsidiary of the Company;

(h) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;

(i) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the termination of your Service (for any reason whatsoever whether or not later found to be invalid or in breach of labor laws in the jurisdiction where you are providing Service or the terms of your employment or service agreement, if any), and in consideration of the grant of the RSUs to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company, the Employer (as defined below), or any other Parent or Subsidiary of the Company, waive your ability, if any, to bring any such claim, and release the Company, the Employer and its Parent or Subsidiaries from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and

(j) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation or salary for any purpose; and

 

1


(k) neither the Company, the Employer nor any Parent or Subsidiary of the Company shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the RSUs or the subsequent sale of any Shares acquired upon settlement.

2. Settlement . Settlement of RSUs shall be made in the same calendar year as the applicable date of vesting under the Vesting Schedule set forth in the Notice; provided, however, that if the vesting date under the Vesting Schedule set forth in the Notice is in December, then settlement of any RSUs that vest in December shall be within 30 days of vesting. Settlement of RSUs shall be in Shares. Settlement means the delivery to you of the Shares vested under an RSU. No fractional RSUs or rights for fractional Shares shall be created pursuant to this Agreement.

3. No Stockholder Rights . Unless and until such time as Shares are issued in settlement of vested RSUs, you shall have no ownership of the Shares allocated to the RSUs and shall have no right to dividends or to vote such Shares.

4. Dividend Equivalents . Dividends, if any (whether in cash or Shares), shall not be credited to you.

5. No Transfer . RSUs may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.

6. Termination . If your Service terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights you have to such RSUs shall immediately terminate, without payment of any consideration to you. Your Service will be considered terminated as of the date you are no longer providing Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any) and will not, subject to the laws applicable to your RSUs, be extended by any notice period mandated under local employment laws ( e.g. , Service would not include a period of “garden leave” or similar period). In case of any dispute as to whether your termination of Service has occurred, the Committee shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

7. Tax Consequences . You acknowledge that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and you should consult a tax adviser regarding your tax obligations prior to such settlement or disposition in the jurisdiction where you are subject to tax.

8. 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 RSUs, including the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends and (2) do not commit to structure the terms of the award or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

Prior to the settlement of your RSUs, 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

 

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local law, (a) withholding Shares that otherwise would be issued to you when your RSUs are settled, 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 and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. The Fair Market Value of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes.

Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case you will receive a refund of any over-withheld amount in cash and will have no entitlement to the Shares equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

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 the vesting and settlement of the RSUs that cannot be satisfied by the means previously described. Finally, you acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

9. Data Privacy . You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Agreement and any other RSU grant materials by and among, as applicable, the Company, the Employer and any other Parent or Subsidiaries, for the exclusive purpose of implementing, administering and managing your participation in the Plan.

You understand that the Company and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor (“ Data ”), for the exclusive purpose of implementing, administering and managing the Plan.

You understand that Data will be transferred to the stock plan service provider as may be designated by the Company from time to time, which is assisting the Company with the implementation, administration and management of the Plan. You understand that the recipients of Data may be located in the United States or elsewhere, and that the recipients’ country ( e.g. , the United States) may have different data privacy laws and protections than your country. You understand that if you reside outside the United States, you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the Company, the designated broker and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that if you reside outside the United States, you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents

 

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herein, in any case without cost, by contacting in writing your local human resources representative. Further, you understand that you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your employment status or service and career with the Employer will not be adversely affected. The only adverse consequence of refusing or withdrawing your consent is that the Company would not be able to grant you RSUs or other equity awards or administer or maintain such awards. Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

10. Acknowledgement . The Company and you agree that the RSUs are granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the RSUs subject to all of the terms and conditions set forth in this Agreement and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement.

11. Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

12. Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock (“ Common Stock ”) may be listed or quoted at the time of such issuance or transfer, which compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

13. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

14. Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be

 

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conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.

15. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

16. Consent to Electronic Delivery of All Plan Documents and Disclosures . By your acceptance of the RSUs, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the RSUs. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

17. Insider Trading Restrictions/Market Abuse Laws . You acknowledge that, depending on your country, you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell the Shares or rights to Shares under the Plan during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you are advised to speak to your personal advisor on this matter.

18. Language . If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control, except as required by local law.

19. Appendix . Notwithstanding any provisions in this Agreement, this award of RSUs shall be subject to any special terms and conditions set forth in any Appendix hereto for your country. Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.

20. Imposition of Other Requirements . The Company reserves the right to impose other requirements on your participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

21. Code Section 409A . For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Internal

 

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Revenue Code of 1986, as amended (the “ Code ”) and the regulations thereunder (“ Section 409A ”). Notwithstanding anything else provided herein, to the extent any payments provided under this Agreement in connection with your termination of employment constitute deferred compensation subject to Section 409A, and you are deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the six-month period measured from your separation from service from the Company or (ii) the date of your death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to you including, without limitation, the additional tax for which you would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

22. Award Subject to Company Clawback or Recoupment . The RSUs shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to your RSUs.

BY ACCEPTING THE RSUs, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

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APPENDIX

ADDITIONAL TERMS AND CONDITIONS

INTERNATIONAL RESTRICTED STOCK UNIT AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Capitalized terms, unless explicitly defined in this Appendix, shall have the meanings given to them in the International Restricted Stock Unit Agreement, the Notice or in the Plan.

Terms and Conditions

This Appendix includes additional terms and conditions that govern the RSUs granted to you under the Plan if you reside in one of the countries listed below. If you are a citizen or resident (or is considered as such for local law purposes) of a country other than the country in which you are currently residing and/or working, or if you transfer to another country after receiving the RSUs, the Company shall, in its discretion, determine to what extent the special terms and conditions contained herein shall be applicable to you.

Notifications

This Appendix also includes information regarding securities, exchange control, tax and certain other issues of which you should be aware with respect to your participation in the Plan. The information is based on the securities, exchange control, tax and other laws in effect in the respective countries as of April 2015. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time that the RSUs vest or you sell Shares acquired under the Plan.

In addition, the information contained herein is general in nature and may not apply to your particular situation and the Company is not in a position to assure you of a particular result. Accordingly, you are advised to seek appropriate professional advice as to how the relevant laws in your country may apply to your individual situation.

Finally, if you are a citizen or resident (or are considered as such for local tax purposes) of a country other than the one in which you are currently residing and/or working, or if you transfer to another country after the grant of the RSUs, the information contained herein may not be applicable to you in the same manner.

AUSTRALIA

Terms and Conditions

Australian Offer Document . The offer of RSUs is intended to comply with the provisions of the Corporations Act 2001, ASIC Regulatory Guide 49 and ASIC Class Order CO 14/1000. Additional details are set forth in the Offer Document for the offer of RSUs to Australian resident employees, which will be provided to you with the International Restricted Stock Unit Agreement.

Notifications

Securities Law Information . If you acquire Shares pursuant to RSUs and offer these Shares for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. You should obtain legal advice on disclosure obligations prior to making any such offer.

 

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Exchange Control Information . Exchange control reporting is required for cash transactions exceeding A$10,000 and international fund transfers. The Australian bank assisting with the transaction will file the report. If there is no Australian bank involved in the transfer, you will be required to file the report.

BELARUS

Terms and Conditions

Sale of Shares . Due to local regulatory requirements, upon the vesting of the RSUs, you agree to the immediate sale of any Shares to be issued to you upon vesting and settlement of the RSUs. You further agree that the Company is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on your behalf pursuant to this authorization) and you expressly authorize the Company’s designated broker to complete the sale of such Shares. You agree that the Company’s designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, you will receive the cash proceeds from the sale of the Shares, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items. You acknowledge that you are not aware of any material nonpublic information with respect to the Company or any securities of the Company as of the date of this International Restricted Stock Unit Agreement.

Notifications

Exchange Control Information . If you are a resident of Belarus, you should obtain a permit from the National Bank of Belarus (the “ National Bank ”) prior to acquiring Shares upon vesting of the RSUs. To obtain the permit, it is necessary to submit certain documents to the National Bank, likely including: (i) an application in a prescribed form; (ii) a copy of a personal identification document ( e.g. , passport); (iii) information on the shares to be acquired ( e.g. , type, number, par value, name of the issuer); and (iv) a copy of the International Restricted Stock Unit Agreement. If you fail to obtain a National Bank permit prior to vesting, you may be subject to an administrative fine.

Exchange control regulations in Belarus are subject to change. You should consult with your personal legal advisor regarding any exchange control obligations that you may have prior acquiring Shares or receiving proceeds from the sale of Shares acquired under the Plan. You are responsible for ensuring compliance with all exchange control laws in Belarus.

CANADA

Terms and Conditions

Settlement . The following provision supplements Section 2 of the International Restricted Stock Unit Agreement:

Notwithstanding anything to the contrary in the Plan, including Section 9.2 of the Plan, the RSUs will be settled in Shares only, not cash.

Termination . The following sentence replaces the second sentence of Section 6 of the International Restricted Stock Unit Agreement:

For purposes of this award of RSUs, your Service will be considered terminated as of the date that is the earliest to occur of: (1) the date of termination of Service, (2) the date you receive notice of termination from the Employer, and (3) the date you are no longer actively providing services, regardless of any notice period or period of pay in lieu of such notice required under applicable law (including, but not limited to statutory law, regulatory law and/or common law).

 

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The following provisions will apply to you if you are a resident of Quebec:

Language Consent . The parties acknowledge that it is their express wish that the International Restricted Stock Unit Agreement, as well as all appendices, documents, notices, and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Les parties reconnaissent avoir exigé la rédaction en anglais de cette Convention, ainsi que de tous documents exécutés, avis donnés et procédures judiciaries intentées, directement ou indirectement, relativement à ou suite à la présente convention.

Data Privacy . The following provision supplements Section 9 of the International Restricted Stock Unit Agreement:

You hereby authorize the Company and the Company’s representatives to discuss and obtain all relevant information from all personnel, professional or non-professional, involved in the administration of the Plan. You further authorize the Company, the Employer, its Parent or other Subsidiaries and the Committee to disclose and discuss the Plan with their advisors. You further authorize the Company, the Employer and its Parent or other Subsidiary to record such information and to keep such information in your employee file.

Notifications

Securities Law Information . You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares acquired under Plan takes place outside of Canada through the facilities of a stock exchange on which the Common Stock is listed.

Foreign Asset/Account Reporting Information . Canadian taxpayers must report annually on Form T1135 (Foreign Income Verification Statement) the foreign property (including Shares acquired under the Plan) held if the total value of such foreign property exceeds C$100,000 at any time during the year. Unvested RSUs also must be reported (generally at nil cost) on Form 1135 if the C$100,000 threshold is exceeded due to other foreign property held. The Form T1135 must be filed at the same time the individual’s files his or her annual tax return. You should consult your personal legal advisor to ensure compliance with applicable reporting obligations.

CHINA

Terms and Conditions

The following Terms and Conditions apply to you if you are subject to the exchange control restrictions and regulations in China, including the requirements imposed by the State Administration of Foreign Exchange (“ SAFE ”), as determined by the Company in its sole discretion.

Vesting Schedule and Termination . The following supplements the “Vesting Schedule” section of the Notice and Section 6 of the International Restricted Stock Unit Agreement:

Notwithstanding to anything to the contrary in the Notice, the International Restricted Stock Unit Agreement or the Plan, the RSUs shall not vest unless and until the Company, the Employer or any other Subsidiary of the Company in China receives all necessary approvals from the SAFE or its local counterpart under the Implementing Rules of the Measures for Administration of Foreign Exchange of Individuals to offer such awards in China. Once SAFE approval has been received and provided you continue to be an Employee of the Company or a Subsidiary of the Company, you will receive a vesting credit for that portion of the RSUs that would have vested prior to obtaining SAFE approval, if applicable, and the remaining portion of the RSUs will vest in accordance with the International Restricted Stock Unit Agreement. If you cease to be an Employee prior to the receipt of SAFE approval, any unvested RSUs will be forfeited.

 

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Sale of Shares . Due to local regulatory requirements, upon the vesting of RSUs, you agree to the immediate sale of any Shares issued under the RSUs. You further agree that the Company is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on your behalf pursuant to this authorization) and you expressly authorize the Company’s designated broker to complete the sale of such Shares. You acknowledge that the Company’s designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, you will receive the cash proceeds from the sale of the Shares, less any brokerage fees or commissions and subject to any obligation to satisfy any Tax-Related Items. You understand that the proceeds from the sale of Shares may need to be repatriated to China pursuant to the below provision, and you agree to comply with all requirements the Company may impose in order to facilitate compliance with exchange control requirements in China prior to receipt of the cash proceeds. You acknowledge that you are not aware of any material nonpublic information with respect to the Company or any securities of the Company as of the date of the International Restricted Stock Unit Agreement.

Exchange Control Requirements . You understand and agree that, pursuant to local exchange control requirements, you will be required to repatriate the cash proceeds from the immediate sale of the Shares and the receipt of any dividends to China. You further understand that, under local law, such repatriation of the cash proceeds may need to be effectuated through a special exchange control account established by the Company, the Employer or another Subsidiary of the Company, and you hereby consent and agree that any proceeds from the sale of any Shares you acquire upon the vesting of RSUs may be transferred to such special account prior to being delivered to you.

You also understand that the proceeds will be delivered to you as soon as possible, but there may be delays in distributing the funds to you due to exchange control requirements in China. Proceeds will be paid to you in U.S. dollars. You will be required to set up a U.S. dollar bank account in China so that the proceeds may be deposited into this account.

You further agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.

Notifications

Exchange Control Information . You may be required to report to SAFE all details of your foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-PRC residents.

GERMANY

Notifications

Exchange Control Information . Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank. If you make or receive a payment in excess of this amount, you are responsible for electronically reporting to the German Federal Bank by the fifth day of the month following the month in which the payment occurs. The form of report ( Allgemeine Meldeportal Statistik ) can be accessed via German Federal Bank’s website (www.bundesbank.de) and is available in both German and English.

HONG KONG

Terms and Conditions

Settlement . The following provision supplements Section 2 of the International Restricted Stock Unit Agreement:

Notwithstanding anything to the contrary in the Plan, including Section 9.2 of the Plan, the RSUs will be settled in Shares only, not cash.

 

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Sale of Shares . To facilitate compliance with securities laws in Hong Kong, you agree not to sell any Shares issued at vesting of the RSUs within six months of the Date of Grant.

Nature of Grant . The Company specifically intends that the Plan will not be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance (“ ORSO ”). Notwithstanding the foregoing, if the Plan is deemed to constitute an occupational retirement scheme for the purposes of ORSO, this award of RSUs shall be void.

Notifications

Securities Law Information . Warning: The RSUs and Shares issued at vesting do not constitute a public offering of securities under Hong Kong law and are available only to Employees of the Company and its Subsidiaries. The International Restricted Stock Unit Agreement, including this Appendix, the Plan and other incidental award documentation have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong, nor has the award documentation been reviewed by any regulatory authority in Hong Kong. The RSUs are intended only for the personal use of each eligible Employee of the Employer, the Company or any Subsidiary of the Company and may not be distributed to any other person. If you are in any doubt about any of the contents of the International Restricted Stock Unit Agreement, including this Appendix, or the Plan, you should obtain independent professional advice.

INDIA

Notifications

Exchange Control Information . You must repatriate any proceeds from the sale of Shares acquired under the Plan to India within 90 days of receipt or any dividends within 180 days of receipt. You must obtain a foreign inward remittance certificate (“ FIRC ”) from the bank where you deposit the foreign currency and should maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation. It is your responsibility to comply with applicable exchange control laws in India.

Because exchange control restrictions in India change frequently, you should consult with your personal advisor before taking any action under the Plan.

Foreign Asset/Account Reporting Information . Indian residents are required to declare any foreign bank accounts and any foreign financial assets (including Shares held outside India) in their annual tax return. You are solely responsible for complying with this reporting obligation and you should consult your personal tax advisor to ensure compliance with applicable reporting obligations.

IRELAND

Notifications

Director Notification Obligation . If you are a director, shadow director or secretary of the Company or an Irish Subsidiary of the Company, you must notify the Company and/or the Irish Subsidiary of the Company in writing within five business days of receiving or disposing of an interest in the Company ( e.g. , RSUs, etc.), or within five business days of becoming aware of the event giving rise to the notification requirement or within five days of becoming a director or secretary if such an interest exists at the time. This notification requirement also applies with respect to the interests of a spouse or children under the age of 18 (whose interests will be attributed to the director, shadow director or secretary).

 

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There are pending changes to this obligation which provide that the requirement applies only if the interest received or disposed of exceeds 1% of the Company. You should consult your personal legal advisor as to whether or not this notification requirement applies to you.

ITALY

Terms and Conditions

Data Privacy . The following provisions replace Section 9 of the International Restricted Stock Unit Agreement:

You understand that the Company, the Employer, its Parent or other Subsidiaries or Affiliates may hold certain personal information about you, including your name, home address and telephone number, date of birth, social insurance number or other identification number ( e.g. , resident registration number), salary, nationality, job title, any shares of stock or directorships that you hold in the Company, details of all RSUs or any other entitlement to shares of stock awarded, awarded, canceled, exercised, vested, unvested or outstanding in your favor (“ Data ”), for the exclusive purpose of implementing, administering and managing your participation in the Plan.

You also understand that providing the Company with Data is necessary for the performance of the Plan and that your refusal to provide Data would make it impossible for the Company to perform its contractual obligations and may affect your ability to participate in the Plan. The Controller of personal data processing is Adesto Technologies Corporation, with its principal operating offices at 1250 Borregas Avenue, Sunnyvale, CA, United States, and its representative in Italy is [name and address of Italian entity].

You understand that Data will not be publicized, but it may be transferred to banks, other financial institutions or brokers involved in the management and administration of the Plan. You further understand that the Company, the Employer, its Parent or other Subsidiaries or Affiliates will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan, and that the Company, the Employer, its Parent and other Subsidiaries or Affiliates may each further transfer Data to third parties assisting the Company in the implementation, administration and management of the Plan, including any requisite transfer to a broker or another third party with whom you may elect to deposit any Shares acquired under the Plan. Such recipients may receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan. You understand that these recipients may be located in the European Economic Area, or elsewhere, such as the United States. Should the Company exercise its discretion in suspending all necessary legal obligations connected with the management and administration of the Plan, you understand that the Company will delete Data as soon as it has accomplished all the necessary legal obligations connected with the management and administration of the Plan.

You understand that Data processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Data are collected and with confidentiality and security provisions as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.

The processing activity, including communication, the transfer of Data abroad, including outside of the European Economic Area, as herein specified and pursuant to applicable laws and regulations, does not require your consent thereto as the processing is necessary to performance of contractual obligations related to implementation, administration and management of the Plan. You understand that, pursuant to Section 7 of the Legislative Decree no. 196/2003, you have the right to, including but not limited to, access, delete, update, ask for rectification of Data and cease, for legitimate reason, any processing of Data. Furthermore, you are aware that Data will not be used for direct marketing purposes. In addition, Data provided may be reviewed, and questions or complaints can be addressed, by contacting your local human resources department.

 

12


Plan Document Acknowledgment . By accepting the RSUs, you acknowledge that you have received a copy of the Plan and the International Restricted Stock Unit Agreement and have reviewed the Plan and the International Restricted Stock Unit Agreement, including this Appendix, in their entirety and fully understand and accept all provisions of the Plan and the International Restricted Stock Unit Agreement, including this Appendix.

You further acknowledge that you have read and specifically and expressly approve the following provisions of the International Restricted Stock Unit Agreement: (i) Termination, (ii) Withholding Taxes and Stock Withholding, (iii) Language, (iv) Governing Law; Severability, (v) Award Subject to Company Clawback or Recoupment, (vi) Data Privacy and (vii) the Terms and Conditions in this Appendix.

Notifications

Foreign Asset/Account Reporting Information . Italian residents who, at any time during the fiscal year, hold foreign financial assets (including cash and Shares) which may generate income taxable in Italy are required to report these assets on their annual tax returns (UNICO Form, RW Schedule) for the year during which the assets are held, or on a special form if no tax return is due. These reporting obligations will also apply to Italian residents who are the beneficial owners of foreign financial assets under Italian money laundering provisions. You should consult your personal advisor to ensure compliance with applicable reporting obligations.

JAPAN

Notifications

Foreign Asset/Account Reporting Information . Japanese residents and foreign nationals with permanent residency in Japan who hold assets outside of Japan (including any Shares acquired under the Plan) with a value exceeding ¥50,000,000 (as of December 31 each year) are required to comply with annual tax reporting obligations with respect to such investments. You should consult your personal advisor to ensure compliance with applicable reporting obligations.

KOREA

Notifications

Exchange Control Information . If you realize US$500,000 or more from the sale of Shares in a single transaction, Korean exchange control laws require you to repatriate the proceeds from such sale to Korea within 18 months of the sale.

Foreign Asset/Account Reporting Information . Korean residents must declare all foreign financial accounts ( e.g. , non-Korean bank accounts, brokerage accounts holding Shares) in countries that have not entered into an “intergovernmental agreement for automatic exchange of tax information” with Korea to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency). You should consult your personal tax advisor regarding reporting requirements in Korea, including whether or not there is an applicable inter-governmental agreement between Korea and any other country where you may hold any Shares or cash acquired in connection with the Plan.

 

13


NORWAY

There are no country-specific provisions.

PHILIPPINES

Notifications

Securities Law Information . The sale or disposal of Shares acquired under the Plan may be subject to certain restrictions under Philippines securities laws. Those restrictions should not apply if the offer and resale of the Shares takes place outside of the Philippines through the facilities of a stock exchange on which the Shares are listed.

RUSSIA

Notifications

Securities Law Information . Any Shares to be issued upon vesting of the RSUs shall be delivered to you through a brokerage account in the U.S. You may hold the Shares in your brokerage account in the U.S.; however, in no event will Shares issued to you under the Plan be delivered to you in Russia.

The Plan and all other materials you may receive regarding the RSUs and participation in the Plan do not constitute advertising or an offering of securities in Russia. The Shares to be issued upon vesting of the RSUs have not and will not be registered in Russia and, therefore, the Shares described in any Plan documents may not be offered or placed in public circulation in Russia. You are not permitted to sell Shares directly to a Russian legal entity or resident.

Exchange Control Information . Russian residents must repatriate to Russia the proceeds from the sale of Shares received in relation to the RSUs within a reasonably short time of receipt. Such funds must be initially credited through a foreign currency account opened in the individual’s name at an authorized bank in Russia. After the funds are initially received in Russia, they may be further remitted to foreign banks subject to the following limitations: (i) the foreign account may be opened only for individuals; (ii) the foreign account may not be used for business activities; and (iii) the individual must give notice to the Russian tax authorities about the opening/closing of each foreign account within one month of the account opening/closing.

You should consult your personal advisor before remitting any sale proceeds to Russia, as exchange control requirements may change.

SINGAPORE

Notifications

Securities Law Information . This award of RSUs is being made in reliance of Section 273(1)(f) of the Securities and Futures Act (Cap. 289) (the “ SFA ”) under which it is exempt from the prospectus and registration requirements under the SFA. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. You should note that this award of RSUs is subject to Section 257 of the SFA and you will not be able to make (i) any subsequent sale of Shares in Singapore or (ii) any offer of such subsequent sale of Shares in Singapore, unless such sale or offer is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than Section 280) of the SFA.

Chief Executive Officer/Director Notification Obligation . If you are a chief executive officer, director, associate director or shadow director of a Singapore Parent, Subsidiary or Affiliate, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore Parent, Subsidiary or Affiliate in writing when you receive an interest ( e.g. , this award of RSUs or

 

14


Shares) in the Company. In addition, you must notify the Singapore Parent, Subsidiary or Affiliate when you sell the Shares. These notifications must be made within two days of acquiring or disposing of any interest in the Company. In addition, a notification of your interests in the Company must be made within two days of becoming a director.

TAIWAN

Notifications

Securities Law Information . The RSUs and any Shares acquired pursuant to the Plan are available only for Employees, Consultants, Directors or Non-Employee Directors of the Company and or a Parent or Subsidiary of the Company. The offer is not a public offer of securities by a Taiwanese company; therefore, it is not subject to registration in Taiwan.

Exchange Control Information . You may remit and acquire up to US$5,000,000 per year in foreign currency (including proceeds from the sale of Shares or the receipt of any dividends) without justification.

If the transaction amount is TWD500,000 or more in a single transaction, you must submit a Foreign Exchange Transaction Form. In addition, if the transaction about is US$500,000 or more, you may be required to provide additional supporting documentation to the satisfaction of the bank involved in the transaction. You should consult with your personal advisor to ensure compliance with applicable exchange control laws in Taiwan.

UNITED KINGDOM

Terms and Conditions

Settlement . The following provision supplements Section 2 of the International Restricted Stock Unit Agreement:

Notwithstanding anything to the contrary in the Plan, including Section 9.2 of the Plan, the RSUs will be settled in Shares only, not cash.

Responsibility for Taxes . The following provision supplements Section 8 of the International Restricted Stock Unit Agreement:

You agree that, if you do not pay or the Employer or the Company does not withhold from you the full amount of income tax that you owe at vesting of the RSUs, or the release or assignment of the RSUs for consideration, or the receipt of any other benefit in connection with the RSUs (the “ Taxable Event ”) within 90 days of the U.K. tax year within which the Taxable Event occurs, or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “ Due Date ”), then the amount that should have been withheld shall constitute a loan owed by you to the Employer, effective as of the Due Date. You agree that the loan will bear interest at the Her Majesty’s Revenue and Customs (“ HMRC ”) official rate and will be immediately due and repayable by you, and the Company and/or the Employer may recover it at any time thereafter by any of the means set forth in this Section 8.

Notwithstanding the foregoing, if you are an executive officer or director (as within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that you are an executive officer or director and income tax is not collected from or paid by you by the Due Date, the amount of any uncollected income tax may constitute a benefit to you on which additional income tax and National Insurance contributions (“ NICs ”) may be due. You will be responsible for reporting and accounting for any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company or the Employer, as applicable, for the value of any NICs due on this additional benefit.

 

15


Joint Election . As a condition of participation in the Plan, you agree to accept any liability for secondary Class 1 NICs that may be payable by the Company or the Employer (or any successor to the Company or the Employer) in connection with the RSUs and any event giving rise to Tax-Related Items (the “ Employer NICs ”). The Employer NICs may be collected by the Company or the Employer using any of the methods described in the Plan or in Section 8 of the International Restricted Stock Unit Agreement.

Without prejudice to the foregoing, you agree to execute a joint election with the Company and/or the Employer (a “ Joint Election ”), the form of such Joint Election being formally approved by HMRC, and any other consent or elections required by the Company or the Employer in respect of the Employer NICs liability. You further agree to execute such other elections as may be required by any successor to the Company and/or the Employer for the purpose of continuing the effectiveness of your Joint Election.

 

16


NOTICE OF PERFORMANCE SHARES AWARD

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “ Company ”) 2015 Equity Incentive Plan (the “ Plan ”) shall have the same meanings in this Notice of Performance Shares Award (this “ Notice ”) and the attached Performance Shares Agreement (the “Agreement ). You have been granted an award of Performance Shares (the “ Performance Shares Award ”) under the Plan subject to the terms and conditions of the Plan, this Notice and the Agreement.

 

Name:   

 

Address:   

 

Number of Shares:   

 

Date of Grant:   

 

Fair Market Value on Date of Grant:   

 

Vesting Commencement Date:   

 

Vesting Schedule:    Subject to the limitations set forth in this Notice, the Plan and the Agreement, [INSERT VESTING SCHEDULE INCLUDING APPLICABLE “PERFORMANCE FACTORS” AS SET FORTH IN THE PLAN]

You acknowledge that the vesting of the Performance Shares Award pursuant to this Notice is earned only by continuing Service. By accepting the Performance Shares Award, you and the Company agree that the Performance Shares Award is granted under and governed by the terms and conditions of the Plan, this Notice and the Agreement. By accepting the Performance Shares Award, you consent to electronic delivery as set forth in the Agreement.

 

PARTICIPANT:     ADESTO TECHNOLOGIES CORPORATION:
Signature:  

 

    By:  

 

Print Name:  

 

    Name:  

 

      Its:  

 


PERFORMANCE SHARES AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted an award of Performance Shares (“ Performance Shares Award ”) by Adesto Technologies Corporation (the “ Company ”) under the 2015 Equity Incentive Plan (the “ Plan ”), subject to the terms, restrictions and conditions of the Plan, the Notice of Performance Shares Award (the “ Notice ”) and this Performance Shares Agreement (this “ Agreement ”).

1. Settlement . Your Performance Shares Award shall be settled in Shares and the Company’s transfer agent shall record ownership of such Shares in your name as soon as reasonably practicable after achievement of the Performance Factors enumerated in the Notice.

2. No Stockholder Rights . Unless and until you are recorded as the holder of such Shares on the stock records of the Company and its transfer agent, you shall have no right to dividends or to vote Shares.

3. No-Transfer . Your interest in this Performance Shares Award shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of.

4. Termination . If your Service terminates for any reason, all of your rights under the Plan, this Agreement and the Notice in respect of this Performance Shares Award shall immediately terminate. In case of any dispute as to whether a termination of Service has occurred, the Committee shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

5. Tax Consequences . YOU SHOULD CONSULT A TAX ADVISER IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX BEFORE ACQUIRING THE SHARES. Shares shall not be issued under this Agreement unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the acquisition or vesting of Shares.

6. 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 Performance Shares Award, including the Performance Shares Award or vesting of Shares pursuant to the Performance Shares Award, the subsequent sale of Shares acquired pursuant to this Performance Shares Award and the receipt of any dividends and (2) do not commit to structure the terms of the Performance Shares Award to reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

The Company will only recognize you as a record holder of Shares if 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 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 they vest, 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 and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the


Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. The Fair Market Value of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. 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. Finally, you acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

7. Acknowledgement . The Company and you agree that the Performance Shares Award is granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the Performance Shares Award subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement.

8. Entire Agreement; Enforcement of Rights . This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

9. Compliance with Laws and Regulations . The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock (“ Common Stock ”) may be listed or quoted at the time of such issuance or transfer, which compliance the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that the Company shall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

10. Governing Law; Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice or this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.


10. No Rights as Employee, Director or Consultant . You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

11. Consent to Electronic Delivery of All Plan Documents and Disclosures . By your acceptance of this Performance Shares Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Performance Shares Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.

12. Award Subject to Company Clawback or Recoupment . To the extent permitted by applicable law, Performance Shares Award shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Performance Shares Award (whether vested or unvested) and the recoupment of any gains realized with respect to your Performance Shares Award.

BY ACCEPTING THE PERFORMANCE SHARES AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

Exhibit 10.04

A DESTO T ECHNOLOGIES C ORPORATION

2015 EMPLOYEE STOCK PURCHASE PLAN

1. PURPOSE. Adesto Technologies Corporation has adopted this Plan effective as of the date of the IPO. The purpose of this Plan is to provide eligible employees of the Company and the Participating Corporations with a means of acquiring an equity interest in the Company and to enhance such employees’ sense of participation in the Company’s affairs. Capitalized terms not defined elsewhere in this Plan are defined in Section 28.

2. ESTABLISHMENT OF PLAN. The Company proposes to grant rights to purchase shares of Common Stock to eligible employees of the Company and its Participating Corporations pursuant to this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed, although the Company makes no undertaking or representation to maintain such qualification. Any term not expressly defined in this Plan but defined in Section 423 of the Code shall have the definition provided by Section 423 of the Code. In addition, with regard to offers of options to purchase shares of Common Stock under the Plan to employees working for a Subsidiary or an Affiliate outside the United States, this Plan authorizes the grant of options under a Non-Section 423 Component that is not intended to meet the requirements of Section 423 of the Code provided that, to the extent necessary under Section 423 of the Code, the other terms and conditions of this Plan are met.

Subject to Section 14, a total of 150,000 shares of Common Stock is reserved for issuance under this Plan. Subject to Section 14, no more than 2,250,000 shares of Common Stock may be issued over the term of this Plan. In addition, on each January 1 of each calendar year, the aggregate number of shares of Common Stock reserved for issuance under the Plan shall be increased automatically by the number of shares equal to one percent (1%) of the total number of outstanding shares of Common Stock outstanding on the immediately preceding December 31 (rounded down to the nearest whole share); provided, that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year. The number of shares initially reserved for issuance under this Plan and the maximum number of shares that may be issued under this Plan shall be subject to adjustments effected in accordance with Section 14. Any or all such shares may be granted under the Section 423 Component.

3. ADMINISTRATION. The Plan will be administered by the Committee. Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all eligible employees and Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of this Plan, to determine eligibility, to designate the Participating Corporations, to determine whether Participating Corporations shall participate in the Section 423 Component or Non-Section 423 Component and to decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules, sub-plans, and/or procedures relating to the operation and administration of this Plan designed to comply with local laws, regulations or customs or to achieve tax, securities law or other objectives for eligible employees outside of the United States. The Committee will have the authority to determine the Fair Market Value of the Common Stock (which determination shall be final, binding and conclusive for all purposes) in accordance with Section 8 below and to interpret Section 8 of this Plan in connection with circumstances that impact the Fair Market Value. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. For purposes of this Plan, the Committee may designate separate offerings under the Plan (the terms of which


need not be identical) in which eligible employees of one or more Participating Corporations will participate, even if the dates of the applicable Offering Periods of each such offering are identical.

4. ELIGIBILITY.

(a) Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period under this Plan, except that one or more of the following categories of employees may be excluded from eligibility under this Plan by the Committee (other than where such exclusion is prohibited by applicable law):

(i) employees who are customarily employed for twenty (20) hours or less per week;

(ii) employees who are customarily employed for five (5) months or less in a calendar year; and

(iii) employees who do not meet any other eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code).

Notwithstanding the foregoing, an individual shall not be eligible if his or her participation in this Plan is prohibited by the law of any country having jurisdiction over him or her, if complying with the laws of the applicable country would cause the Plan to violate Section 423 of the Code, or if he or she is subject to a collective bargaining agreement that does not provide for participation in this Plan.

(b) No employee who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, owns stock or holds options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary shall be granted an option to purchase Common Stock under this Plan. Notwithstanding the foregoing, the rules of Section 424(d) of the Code shall apply in determining share ownership and the extent to which shares held under outstanding equity awards are to be treated as owned by the employee.

5. OFFERING DATES.

(a) Each Offering Period of this Plan may be of up to twenty seven (27) months’ duration and shall commence and end at the times designated by the Committee. Each Offering Period shall consist of one Purchase Period during which Contributions made by Participants are accumulated under this Plan.

(b) The initial Offering Period shall commence on the Effective Date and shall end with the Purchase Date that occurs on June 30, 2016 or another date selected by the Committee which is approximately six (6) months after the commencement of the initial Offering Period, but no more than twenty-seven (27) months after the commencement of the initial Offering Period. The initial Offering Period shall consist of one Purchase Period. Thereafter, a six-month Offering Period shall commence on each January 1 st and July 1 st , with each such Offering Period also consisting of one six-month Purchase Period, except as otherwise provided by an applicable sub-plan, or on such other date determined by the Committee. The Committee may at any time establish a different duration for an Offering Period or Purchase Period to be effective after the next scheduled Purchase Date, up to a maximum duration of twenty-seven (27) months.

 

- 2 -


6. PARTICIPATION IN THIS PLAN.

(a) Any employee who is an eligible employee determined in accordance with Section 4 immediately prior to the initial Offering Period will be automatically enrolled in the initial Offering Period under this Plan for the maximum number of shares of Common Stock purchasable. With respect to subsequent Offering Periods, any eligible employee determined in accordance with Section 4 will be eligible to participate in this Plan, subject to the requirement of Section 6(b) hereof and the other terms and provisions of this Plan.

(b) With respect to Offering Periods after the initial Offering Period, a Participant may elect to participate in this Plan by submitting an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.

(c) Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in each subsequent Offering Period commencing immediately following the last day of the prior Offering Period unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in an Offering Period as set forth in Section 11 below. A Participant who is continuing participation pursuant to the preceding sentence is not required to file any additional enrollment agreement in order to continue participation in this Plan; a Participant who is not continuing participation pursuant to the preceding sentence is required to file an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.

7. GRANT OF OPTION ON ENROLLMENT. Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock of the Company determined by a fraction, the numerator of which is the amount accumulated in such Participant’s Contribution account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date (but in no event less than the par value of a share of the Common Stock), or (ii) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Purchase Date; provided, however , that for the Purchase Period within the initial Offering Period the numerator shall be fifteen percent (15%) of the Participant’s compensation for such Purchase Period, or such lower percentage as determined by the Committee prior to the start of the Offering Period, and provided , further , that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date.

8. PURCHASE PRICE. The Purchase Price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:

(a) The Fair Market Value on the Offering Date; or

(b) The Fair Market Value on the Purchase Date.

9. PAYMENT OF PURCHASE PRICE; CONTRIBUTION CHANGES; SHARE ISSUANCES.

(a) The Purchase Price shall be accumulated by regular payroll deductions made during each Offering Period, unless the Committee determines with respect to categories of Participants outside the United States that Contributions may be made in another form due to local legal requirements. The Contributions are made as a percentage of the Participant’s Compensation in one percent (1%)

 

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increments not less than one percent (1%), nor greater than fifteen (15%) percent or such lower limit set by the Committee. “ Compensation ” shall mean base salary (or in foreign jurisdictions, equivalent cash compensation); however, the Committee may at any time prior to the beginning of an Offering Period determine that for that and future Offering Periods, Compensation shall mean all cash compensation reported on the employee’s Form W-2 or corresponding local country tax return, including without limitation base salary or regular hourly wages, bonuses, incentive compensation, commissions, overtime, shift premiums, and draws against commissions. For purposes of determining a Participant’s Compensation, any election by such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code (or in foreign jurisdictions, equivalent salary deductions) shall be treated as if the Participant did not make such election. Contributions shall commence on the first payday following the last Purchase Date (with respect to the initial Offering Period, as soon as practicable following the effective date of filing with the U.S. Securities and Exchange Commission a securities registration statement for the Plan) and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan. Notwithstanding the foregoing, the terms of any sub-plan may permit matching shares without the payment of any purchase price.

(b) A Participant may decrease the rate of Contributions during an Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions, with the new rate to become effective no later than the second payroll period commencing after the Company’s receipt of the authorization and continuing for the remainder of the Offering Period unless changed as described below. A decrease in the rate of Contributions may be made once during an Offering Period, but up to twice during the initial Offering Period, or more frequently under rules determined by the Committee. A Participant may increase or decrease the rate of Contributions for any subsequent Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.

(c) A Participant may reduce his or her Contribution percentage to zero during an Offering Period by filing with the Company or a third party designated by the Company a request for cessation of Contributions. Such reduction shall be effective beginning no later than the second payroll period after the Company’s receipt of the request and no further Contributions will be made for the duration of the Offering Period. Contributions credited to the Participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stock in accordance with Subsection (e) below. A reduction of the Contribution percentage to zero shall be treated as such Participant’s withdrawal from such Offering Period and the Plan, effective as of the day after the next Purchase Date following the filing date of such request with the Company.

(d) All Contributions made for a Participant are credited to his or her book account under this Plan and are deposited with the general funds of the Company, except to the extent local legal restrictions outside the United States require segregation of such Contributions. No interest accrues on the Contributions, except to the extent required due to local legal requirements. All Contributions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions, except to the extent necessary to comply with local legal requirements outside the United States.

(e) On each Purchase Date, so long as this Plan remains in effect and provided that the Participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the Participant wishes to withdraw from that Offering Period under this Plan and have all Contributions accumulated in the account maintained on behalf of the Participant as of that date returned to the Participant, the Company shall apply the funds then in the Participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such Participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The Purchase Price per share shall be as specified in Section 8 of this Plan. Any fractional share, as calculated under this Subsection (e), shall be rounded down to the next lower whole share, unless the Committee

 

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determines with respect to all Participants that any fractional share shall be credited as a fractional share. Any amount remaining in a Participant’s account on a Purchase Date that is less than the amount necessary to purchase a full share of Common Stock shall be returned to the Participant, without interest (except to the extent necessary to comply with local legal requirements outside the United States); however, the Committee may provide that such amounts may be carried forward into the next Purchase Period or Offering Period, as the case may be. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest (except to the extent required due to local legal requirements outside the United States). No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date, except to the extent required due to local legal requirements outside the United States.

(f) As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participant’s benefit representing the shares purchased upon exercise of his or her option to purchase shares hereunder.

(g) During a Participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.

(h) To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Company and the Participating Corporation employing the Participant for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company or any Subsidiary or Affiliate, as applicable, may withhold, by any method permissible under the applicable law, the amount necessary for the Company or Subsidiary or Affiliate, as applicable, to meet applicable withholding obligations, including any withholding required to make available to the Company or Subsidiary or Affiliate, as applicable, any tax deductions or benefits attributable to the sale or early disposition of shares of Common Stock by a Participant. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.

10. LIMITATIONS ON SHARES TO BE PURCHASED.

(a) Any other provision of the Plan notwithstanding, no Participant shall purchase Common Stock with a Fair Market Value in excess of the following limit:

(i) In the case of Common Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased in the current calendar year (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary).

(ii) In the case of Common Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A) $50,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the immediately preceding calendar year.

For purposes of this Subsection (a), the Fair Market Value of Common Stock shall be determined in each case as of the beginning of the Offering Period in which such Common 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 (a) from purchasing additional Common Stock under the Plan, then his or her Contributions shall automatically be discontinued and shall automatically resume at the beginning of the earliest Purchase Period that will end in the next calendar year (if he or she then is an eligible

 

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employee), provided that when the Company automatically resumes such Contributions, the Company must apply the rate in effect immediately prior to such suspension.

(b) In no event shall a Participant be permitted to purchase more than 2500 shares on any one Purchase Date, or such lesser number as the Committee shall determine. If a lower limit is set under this Subsection (b), then all Participants will be notified of such limit prior to the commencement of the next Offering Period for which it is to be effective.

(c) If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company will give notice of such reduction of the number of shares to be purchased under a Participant’s option to each Participant affected.

(d) Any Contributions accumulated in a Participant’s account that are not used to purchase stock due to the limitations in this Section 10, and not subject to the automatic purchase provision of Section 9(e), shall be returned to the Participant as soon as practicable after the end of the applicable Purchase Period, without interest (except to the extent required due to local legal requirements outside the United States).

11. WITHDRAWAL.

(a) Each Participant may withdraw from an Offering Period under this Plan pursuant to a method specified for such purpose by the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.

(b) Upon withdrawal from this Plan, the accumulated Contributions shall be returned to the withdrawn Participant, without interest (except to the extent required due to local legal requirements outside the United States), and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for Contributions in the same manner as set forth in Section 6 above for initial participation in this Plan.

12. TERMINATION OF EMPLOYMENT. Termination of a Participant’s employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employee of the Company or of a Participating Corporation, immediately terminates his or her participation in this Plan (except as required due to local legal requirements outside the United States). In such event, accumulated Contributions credited to the Participant’s account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest (except to the extent required due to local legal requirements outside the United States). For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Corporation in the case of sick leave, military leave, or any other leave of absence approved by the Company; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. The Company will have sole discretion to determine whether a Participant has terminated employment and the effective date on which the Participant terminated employment, regardless of any notice period or garden leave required under local law.

13. RETURN OF CONTRIBUTIONS. In the event a Participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated Contributions credited to such

 

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Participant’s account. No interest shall accrue on the Contributions of a Participant in this Plan (except to the extent required due to local legal requirements outside the United States).

14. CAPITAL CHANGES. If the number of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 2 and 10 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with the applicable securities laws; provided that fractions of a share will not be issued.

15. NONASSIGNABILITY. Neither Contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.

16. USE OF PARTICIPANT FUNDS AND REPORTS. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant Contributions (except to the extent required due to local legal requirements outside the United States). Until shares are issued, Participants will only have the rights of an unsecured creditor unless otherwise required under local law. Each Participant shall receive promptly after the end of each Purchase Period a report of his or her account setting forth the total Contributions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.

17. NOTICE OF DISPOSITION. Each U.S. taxpayer Participant shall notify the Company in writing if the Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “ Notice Period ”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.

18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation, or restrict the right of the Company or any Participating Corporation to terminate such employee’s employment.

19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees granted an option under the Section 423 Component of this Plan shall have equal rights and privileges with respect to this Plan or within any separate offering under the Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code, without further act or amendment by the Company, the Committee or the Board, shall be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.

20. NOTICES. All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

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21. TERM; STOCKHOLDER APPROVAL. This Plan will become effective on the Effective Date. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Board or Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would occur more than twenty-seven (27) months after commencement of the Offering Period to which it relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate without the purchase of such shares and Participants in such Offering Period shall be refunded their Contributions without interest). This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the Effective Date under the Plan.

22. DESIGNATION OF BENEFICIARY.

(a) Unless otherwise determined by the Committee, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to a Purchase Date. Such form shall be valid only if it was filed with the Company at the prescribed location before the Participant’s death.

(b) If authorized by the Company, such designation of beneficiary may be changed by the Participant at any time by written notice filed with the Company at the prescribed location before the Participant’s death. In the event of the death of a Participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such Participant’s death, the Company shall deliver such cash to the executor or administrator of the estate of the Participant or to the legal heirs of the Participant.

23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the U.S. Securities Act of 1933, as amended, the U.S. Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, exchange control restrictions and/or securities law restrictions outside the United States, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Shares may be held in trust or subject to further restrictions as permitted by any subplan.

24. APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.

25. AMENDMENT OR TERMINATION. The Committee, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. Unless otherwise required by applicable law, if the Plan is terminated, the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously-scheduled expiration, all amounts then credited to Participants’ accounts for such Offering Period, which have not been used to purchase shares of Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount contributed

 

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during an Offering Period, establish the exchange ratio applicable to amounts contributed in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts contributed from the Participant’s base salary and other eligible compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan. Such actions will not require stockholder approval or the consent of any Participants. However, no amendment shall be made without approval of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. In addition, in the event the Board or Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board or Committee may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequences including, but not limited to: (i) amending the definition of compensation, including with respect to an Offering Period underway at the time; (ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (iii) shortening any Offering Period by setting a Purchase Date, including an Offering Period underway at the time of the Committee’s action; (iv) reducing the maximum percentage of Compensation a participant may elect to set aside as Contributions; and (v) reducing the maximum number of shares a Participant may purchase during any Offering Period. Such modifications or amendments will not require approval of the stockholders of the Company or the consent of any Participants.

26. CORPORATE TRANSACTIONS. In the event of a Corporate Transaction, the Offering Period for each outstanding right to purchase Common Stock will be shortened by setting a new Purchase Date and will end on the new Purchase Date. The new Purchase Date shall occur on or prior to the consummation of the Corporate Transaction, as determined by the Board or Committee, and the Plan shall terminate on the consummation of the Corporate Transaction.

27. CODE SECTION 409A; TAX QUALIFICATION.

(a) Options granted under the Plan generally are exempt from the application of Section 409A of the Code. However, options granted to U.S. taxpayers which are not intended to meet the Code Section 423 requirements are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to Subsection (b), options granted to U.S. taxpayers outside of the Code Section 423 requirements shall be subject to such terms and conditions that will permit such options to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares of Common Stock subject to an option be delivered within the short-term deferral period. Subject to Subsection (b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Committee determines that an option or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the option shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.

(b) Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment ( e.g. , under Section 409A of the Code), the Company makes no representation to

 

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that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Subsection (a). The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.

28. DEFINITIONS.

(a) “ Affiliate ” means any entity, other than a Subsidiary or Parent, (i) that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.

(b) “ Board ” shall mean the Board of Directors of the Company.

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

(d) “ Committee ” shall mean the Compensation Committee of the Board that consists exclusively of one or more members of the Board appointed by the Board.

(e) “ Common Stock ” shall mean the common stock of the Company.

(f) “ Company ” shall mean Adesto Technologies Corporation.

(g) “ Contributions ” means payroll deductions taken from a Participant’s Compensation and used to purchase shares of Common Stock under the Plan and, to the extent payroll deductions are not permitted by applicable laws (as determined by the Committee in its sole discretion) contributions by other means, provided, however, that allowing such other contributions does not jeopardize the qualification of the Plan as an “employee stock purchase plan” under Section 423 of the Plan.

(h) “ Corporate Transaction ” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(i) “ Effective Date ” shall mean the date on which the Registration Statement covering the initial public offering of the shares of Common Stock is declared effective by the U.S. Securities and Exchange Commission.

(j) “ Fair Market Value ” shall mean, as of any date, the value of a share of Common Stock determined as follows:

(1) if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (collectively, the “ Nasdaq Market ”), its closing price on the Nasdaq Market on the date of determination, or if there are no sales for such date,

 

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then the last preceding business day on which there were sales, as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or

(2) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or

(3) if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or

(4) with respect to the initial Offering Period, Fair Market Value on the Offering Date shall be the price at which shares of Common Stock are offered to the public pursuant to the Registration Statement covering the initial public offering of shares of Common Stock; or

(5) if none of the foregoing is applicable, by the Board or the Committee in good faith.

(k) “ IPO ” shall mean the initial public offering of Common Stock.

(l) “ Non-Section 423 Component ” means the part of the Plan which is not intended to meet the requirements set forth in Section 423 of the Code.

(m) “ Notice Period ” shall mean within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased.

(n) “ Offering Date ” shall mean the first business day of each Offering Period. However, for the initial Offering Period the Offering Date shall be the Effective Date.

(o) “ Offering Period ” shall mean a period with respect to which the right to purchase Common Stock may be granted under the Plan, as determined by the Committee pursuant to Section 5(a).

(p) “ Parent ” shall have the same meaning as “parent corporation” in Sections 424(e) and 424(f) of the Code.

(q) “ Participant ” shall mean an eligible employee who meets the eligibility requirements set forth in Section 4 and who is either automatically enrolled in the initial Offering Period or who elects to participate in this Plan pursuant to Section 6(b).

(r) “ Participating Corporation ” shall mean any Parent, Subsidiary or Affiliate that the Committee designates from time to time as eligible to participate in this Plan. For purposes of the Section 423 Component, only the Parent and Subsidiaries may be Participating Corporations, provided, however, that at any given time a Parent or Subsidiary that is a Participating Corporation under the Section 423 Component shall not be a Participating Corporation under the Non-Section 423 Component. The Committee may provide that any Participating Corporation shall only be eligible to participate in the Non-Section 423 Component.

(s) “ Plan ” shall mean this Adesto Technologies Corporation 2015 Employee Stock Purchase Plan, as may be amended from time to time.

(t) “ Purchase Date ” shall mean the last business day of each Purchase Period.

 

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(u) “ Purchase Period ” shall mean a period during which Contributions may be made toward the purchase of Common Stock under the Plan, as determined by the Committee pursuant to Section 5(b).

(v) “ Purchase Price ” shall mean the price at which Participants may purchase shares of Common Stock under the Plan, as determined pursuant to Section 8.

(w) “ Section 423 Component ” means the part of the Plan, which excludes the Non-Section 423 Component, pursuant to which options to purchase shares of Common Stock under the Plan that satisfy the requirements for “employee stock purchase plans” set forth in Section 423 of the Code may be granted to eligible employees.

(x) “ Subsidiary ” shall have the same meaning as “subsidiary corporation” in Sections 424(e) and 424(f) of the Code.

 

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A DESTO T ECHNOLOGIES C ORPORATION ( THE “C OMPANY ”)    U.S. F ORM
2015 E MPLOYEE S TOCK P URCHASE P LAN (“ESPP”)    E NROLLMENT /C HANGE F ORM

 

S ECTION 1:    C HECK D ESIRED A CTION :    AND C OMPLETE S ECTIONS :

 

A CTIONS

  

 

¨     Enroll in the ESPP

  

 

2 + 3 + 4 + 7

   ¨     Elect / Change Contribution Percentage    2 + 4 + 7
   ¨     Discontinue Contributions    2 + 5 + 7

 

S ECTION 2:    Name:   

 

P ERSONAL D ATA    Home Address:   

 

  

 

   Social Security No.: ¨ ¨ ¨ - ¨ ¨ - ¨ ¨ ¨ ¨   

 

S ECTION 3:

 

E NROLL

   ¨   I hereby elect to participate in the ESPP, effective at the beginning of the next Offering Period. I elect to purchase shares of the Common Stock of the Company pursuant to the ESPP. I understand that the stock certificate(s) for the shares purchased on my behalf will be issued in street name and deposited directly into my brokerage account. I hereby agree to take all steps, and sign all forms, required to establish an account with the Company’s broker for this purpose.
   My participation will continue as long as I remain eligible, unless I withdraw from the ESPP by filing a new Enrollment/Change Form with the Company. I understand that I must notify the Company of any disposition of shares purchased under the ESPP.

 

S ECTION 4:

 

E LECT /C HANGE

C ONTRIBUTION

P ERCENTAGE

   I hereby authorize the Company to withhold from each of my paychecks such amount as is necessary to equal at the end of the applicable Offering Period     % of my Compensation (as provided in Section 9 of the ESPP) paid during such Offering Period as long as I continue to participate in the ESPP. That amount, plus any accumulated payroll deductions thus far during the current Offering Period if this is a change, will be applied to the purchase of shares of the Common Stock pursuant to the ESPP. The percentage must be a whole number (from 1%, up to a maximum of 15%, with respect to enrollment or an increase in contribution percentage; from 0%, up to a maximum of 14% for a decrease in contribution percentage).
   If this is a change to my current enrollment, this represents an ¨ -increase ¨ -decrease to my contribution percentage.
  

Note:    You may not increase your contribution at any time within an Offering Period. You may decrease your contribution percentage to a percentage other than 0% only once within an Offering Period, but up to twice during the initial Offering Period, to be effective during that Offering Period. A change will become effective as soon as reasonably practicable after the form is received by the Company. An increase in your contribution percentage can only take effect with the next Offering Period .

 

S ECTION 5:

 

D ISCONTINUE

C ONTRIBUTIONS

  ¨    I hereby elect to stop my contributions under the ESPP , effective as soon as reasonably practicable after this form is received by the Company. Accumulated payroll deductions will be returned to me without interest, pursuant to Section 11 of the ESPP.


S ECTION 6:

 

E LECTRONIC D ELIVERY AND A CCEPTANCE

   The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the ESPP by electronic means. I hereby consent to receive such documents by electronic delivery and agree to participate in the ESPP through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

S ECTION 7:

 

A CKNOWLEDGMENT

AND S IGNATURE

   I acknowledge that I have received a copy of the ESPP Prospectus (which summarizes the major features of the ESPP). I have read the Prospectus and my signature below indicates that I hereby agree to be bound by the terms of the ESPP.
     Signature:  

 

   Date:  

 

Exhibit 23.02

Consent of Independent Registered Public Accounting Firm

We hereby consent to the use in this Amendment No. 1 to the Registration Statement on Form S-1 of our report dated October 2, 2015 relating to the consolidated financial statements of Adesto Technologies Corporation and its subsidiaries appearing in the Prospectus, which is a part of such Registration Statement. We also consent to the reference of our firm under the heading “Experts” in such Registration Statement.

/s/ Burr Pilger Mayer, Inc.

San Jose, California

October 2, 2015